Labour's farm tax architect calls for fresh capital gains raid
Arun Advani, of the left-leaning Centre for the Analysis of Taxation think tank, said that the Government should 'start by fixing capital gains tax' if it wanted to 'tax wealth better'.
It comes as business secretary, Jonathan Reynolds, ruled out Labour MPs' 'daft' demands for a 'magic wealth tax', urging backbenchers to 'be serious'.
The Chancellor has already raised the rate of capital gains tax to 24pc for higher rate taxpayers, and 18pc for basic rate taxpayers.
But Mr Advani, an economics professor at the University of Warwick, told the Mail on Sunday that Labour could double its tax take if it brought capital gains tax in line with income tax.
He said: 'The current way capital gains tax is used encourages tax avoidance. If the Government were looking at taxing wealth better, it would be much better to start by fixing capital gains tax.'
Labour ministers have previously admitted that Mr Advani's research formed the basis of the inheritance tax raid on farms.
The economics professor, who also sits on the advisory board for the Office for Budget Responsibility, wrote a report in 2023 calling for agricultural property relief and other 'loopholes' to be scrapped.
A year later, in her maiden Budget, Ms Reeves announced that inherited farms worth more than £1m would be taxed at a rate of 20pc after having been shielded from the levies for decades.
A 20pc rate will also be charged on inherited business assets over £1m when someone dies. Mr Advani has since urged Labour to go further and halve agricultural property relief to £500,000.
Shadow business secretary, Andrew Griffith, told the Mail that capital gains tax was 'a wealth tax by another name', and that the tax further punished people 'on the higher inflation Labour is causing'.
It comes as official figures show a sharp drop in capital gains tax receipts following successive cuts to allowances, suggesting they have backfired.
Data published by HM Revenue & Customs (HMRC) on Friday showed the Government's capital gains tax take fell by 18pc to £12bn in the 2023-24 financial year, as the Conservatives halved the annual tax-free allowance to £6,000.
HMRC suggested receipts in 2024-25 would drop a further 10pc to £13.1bn as a result of the allowance being cut again – to £3,000.
Sarah Coles, of wealth manager Hargreaves Lansdown, said there was 'a decent chance that an awful lot of investors were just sitting on gains'.
She added: 'It's a classic example of tweaking a tax in order to raise money – and then ending up with less in the long term.'
Critics argue that increasing capital gains tax would undermine the Chancellor's drive for economic growth by discouraging investment.
Jason Hollands, of wealth manager Evelyn Partners, said: 'If taxes on gains are seen to be too punitive, people will conclude the rewards aren't worth the risk, which would undermine the economy.'
However, the OBR predicts capital gains tax receipts to almost double over the next five years to £25.5bn by 2029-30.
Laith Khalaf, of stockbroker AJ Bell, said: 'Receipts largely reflect selling activity in the previous tax year, and plenty of people took fright ahead of last October's Budget and decided to sell up, in case of a capital gains tax raid.
'As things turned out, the Chancellor's changes to capital gains tax for individuals were relatively modest, but those who disposed of assets at a substantial profit ahead of the Budget will still be on the hook for capital gains tax, especially now the annual amount of gains you can make before paying the tax has been cut to just £3,000.'
The Treasury was approached for comment.
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