IPPR Reports on Capital Gains Tax Debate

The Institute for Public Policy Research (IPPR) has released a report suggesting that raising capital gains tax (CGT) to align with income tax would not deter investment or entrepreneurship in the UK. Interviews with millionaire entrepreneurs indicated that CGT is not a primary factor in their investment decisions, which are more influenced by access to financing and market conditions. The report argues that most capital gains are realized by passive asset owners rather than active entrepreneurs, and therefore, any tax increase would mainly impact the former. Chancellor Rachel Reeves is considering this tax hike as part of a broader strategy to address a significant budget gap, despite warnings from some business leaders that it could harm the entrepreneurial ecosystem. IPPR believes that there are more effective policies available to support entrepreneurship than maintaining low CGT rates. In contrast, Canada's finance minister stated that their increase in the capital gains inclusion rate would not hamper investment, viewing the adjustment as reasonable.