Economist Arthur Laffer slams proposals to raise cap gains tax

ARTHUR Laffer, the celebrated economist who created the Laffer curve to show how dropping tax rates could result in increased revenue, has warned hiking capital gains tax (CGT) will cause an “inordinate amount of damage” to the UK economy.

“Raising capital gains tax rates will reduce total capital gains; it will lower total profits; it will lower total investments; it will reduce wages and total employment,” Laffer writes in this week’s Spectator magazine. “[It is] about as bad an idea for the UK as I could imagine.”

Laffer’s damning indictment of the proposals, which could see CGT rise to 40 per cent, in line with income tax, comes after City A.M. launched a campaign against the move – supported by Tullett Prebon chief Terry Smith, entrepreneur Luke Johnson and Seymour Pierce boss Keith Harris.

Robin Bowie, chairman of hedge fund adviser Dexion Capital, yesterday added his voice to the campaign, saying: “Investment and enterprise are the weapons of mass construction that can grow our economy out of this chaos. We need to ensure this government does not stand in their way.”