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The UK Government should scrap capital gains tax (CGT), stamp duty, council tax, business rates, and inheritance tax to boost the economy, the Institute of Economic Affairs has recommended in a new report.
The IEA said that CGT is generally a "double tax" because it taxes anticipated profits and retained profits that are taxed elsewhere in the system. It generates relatively little revenue, the IEA added, and discourages investment and entrepreneurial activity.
It added that if CGT is not abolished, price indexation allowance should be re-introduced so that investor are not taxed on "illusory gains."
Turning to inheritance tax, the IEA said the UK is an outlier in charging a tax on estates at death and at such a high rate. It noted that the regime is commonly avoided.
If IHT is not scrapped, the Government should introduce a system of taxing large gifts at a lower rate closer to 20 percent over a large lifetime tax-free limit of around GBP500,000 (USD609,374) to limit the burden on estates that are widely disbursed and reduce the incentives for avoidance, the IEA said.
The IEA added that stamp duty, council tax, and business rates should be replaced with property taxes "that are much less economically harmful," such as an annual property-based tax set at a fixed percentage of a property's value, with a cap of one percent.
"Changes to these three groups of taxes would considerably simplify the tax system and make taxes more economically efficient," said Professor Philip Booth, Academic Fellow at the IEA.
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