The analysis was carried out for the Guardian by Arun Advani, the assistant professor of economics at the University of Warwick’s CAGE Research Centre and a research fellow specialising in tax at the Institute for Fiscal Studies.
He’s the bloke at that wealth commission who advocated retrospective taxation.
Using the latest data on capital gains, as recorded by HMRC, Advani estimates that if gains were taxed at the same rates as salaries, an extra £13.8bn could have been collected the in 2016-17, rising to £15.9bn in 2019-20.
The idea of alignment is not new. The former Conservative chancellor Nigel Lawson introduced parity between capital gains and income taxes in 1988, but this was unpicked a decade later by his Labour successor, Gordon Brown.
“The chancellor doesn’t just decide how much money to raise, he also has to choose how to do it fairly. So far he has raised taxes on those who work to earn a living, in order to protect those who live off income from wealth,” Advani said.
Well, yes, the Lawson rate included an inflation adjustment. The Brown one didn’t. Thus the difference, at least in part, in the rates. And yes, this does make a difference. In that decade following 2007 inflation was about 30%. As CGT operates over time taxing at income levels would be a tax on phantom gains, wouldn’t it?