To increase capital gains revenues cut rates, don’t increase them

To address the deficit, George Osborne will probably have to raise taxes. This is a grim truth to which most people are reconciled. But raising taxes and raising revenue are two different things. If the Chancellor is serious about closing that deficit, then he would doubtless be interested in the idea that a Capital Gains Tax raise from 18 per cent to 50 per cent might be a chimera tax. That is to say, one which raises no money at all. Worse, in fact, the odds are that tax revenues will fall and the deficit will be made worse by this tax rise.

The international evidence is absolutely clear. As sure as night follows day, tax revenues go down when CGT rates go up. Revenue rises when CGT is lowered to a rate which is attractive to investors (and this includes those investing in a second home by means of pension provision).