Oral Answers to Questions

Andrew Love Excerpts

Tuesday 13th July 2010 Commons Chamber

[Mr Gauke]

There are measures contained in the Finance Bill, which we are currently debating, that will reduce tax avoidance. We take the issue seriously, but the hon. Lady puts her finger on one of the problems. There were a number of structural difficulties in the tax system as it was left to us, one of which was the wide disparity between income tax rates and capital gains tax rates, and we have been able to do something about that.

[Mr Andrew Love (Edmonton) (Lab/Co-op)]

In introducing the Budget, the Chancellor justified the move to a 28% rate in the following terms:

“I asked the Treasury to examine what would have happened if we had increased the rate much further beyond 28%, and its dynamic analysis showed that that would have resulted in smaller total revenues.”—[Official Report, 22 June 2010; Vol. 512, c. 178.]

Can the hon. Gentleman justify that?

[Mr Gauke]

Yes, and had the hon. Gentleman been in the Chamber at about quarter past 10 last night, he would have heard me doing so at some length. The fact is that for every 1% by which the gap between income tax and capital gains tax is reduced, we get an extra £60 million from income tax. However, there is also a countervailing pressure, which is that fewer transactions are entered into. The analysis based on studies done in America and elsewhere shows that 28% is about the level at which we maximise revenue.