Sunday, 30 May 2010

Telegraph targets Alexander

The Daily Telegraph has now targeted the new Chief Secretary to the Treasury David Alexander over allegations that he used a tax loophole to avoid paying capital gains tax on his second home in London: Danny

They claim it is part of their campaign on behalf of 'ordinary' second home owners and small investors. I am not sure what an 'ordinary' second home owner is. Some people, including politicians, need a second home for work related reasons. Others choose to have one for lifestyle reasons, but it's hardly something one can afford to do on a median income. As for small investors, I am one, but I wouldn't buy shares outside of an ISA or a SIPP as a tax efficient vehicle and I would expect to pay capital gains tax if I sold a substantial number.

The fact of the matter is that an anomaly has developed between the top rate of income tax and the top rate of capital gains tax. This opens the way for tax avoidance which is not acceptable in a period of fiscal consolidation. How one closes this gap is another matter: one does have to do it in one go or immediately and one could look at the exemption on relatively small gains.

The Telegraph should be careful what they wish for. Presumably they would prefer a Conservative majority government, but that is not a possibility. The alternative is a minority Conservative government which would be much weaker. The objective of the coalition was to establish 'strong and stable' government at a time of economic and financial crisis. Although phrases like the 'national interest' are used too readily, this is a period when we need to try and rise about cheap political point scoring to undermine one part of the Coalition Government.

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