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Treasury could raise £16bn a year if shares and property were taxed like salaries

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Treasury could raise £16bn a year if shares and property were taxed like salaries

The treasury could raise an extra £16bn a year if the low tax rates on profits from shares and property were increased and brought back into line with taxes on salaries.

Exclusive analysis of data on the 540,000 wealthiest individuals in the UK – the top 1% – shows how decades of low taxes on capital gains, a type of income mainly available to the wealthiest in society, is creating a new breed of “super-gainers”.

The findings will boost calls for reforms which spread the tax burden more fairly. The chancellor, Rishi Sunak, was criticised by members of his own party last month after increasing national insurance rates to raise billions for health and social care while leaving the earnings of the wealthiest largely untouched.

Under the current system, income – which covers earnings such as salaries – is taxed at a maximum rate of 45%. Capital gains – the profit made when an asset such as shares or property is sold for more than it cost to acquire – is taxed at much lower rates. Gains from shares attract a maximum rate of 20%, while the maximum for property is 28%.

Analysis has found that since the late 1990s, the proportion of earnings that are declared as capital gains by the top 1% has ballooned: just 3% of their income came through gains in 1997, doubling to 5.4% in 2010. By the 2017/18 tax year it had reached 13.3%.

Among the extremely rich – the 50,000 people who make up the 0.1% – the amount declared in capital gains grew by 213% between 2007 and 2017. By contrast, this group’s salaries have not grown as fast. Their median income grew by 22% between 2007 and 2017.

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.

“We’ve seen that by reducing capital gains tax rates, the primary thing it has done is encourage people to take income as capital gains, reducing tax take without providing any wider benefits. It is hard to explain why people who are more able to restructure their income in this way should pay less than those who can’t,” Advani said.

Much of the information about the capital gains of the wealthiest 1% of taxpayers is not available in any public dataset. The analysis was only possible because Advani and his fellow researchers were given access to a secure room at HMRC, where they were able to view anonymised tax returns for the super-rich.

In a paper published last year, based on their HMRC research, they found this type of income was very concentrated at the top, with the 5,000 highest earners receiving 54% of all capital gains.

Because gains are so lightly taxed, the wealthiest pay a far lower share of their earnings to the tax authorities than most workers. The top 0.001% – 400 people with earnings of between £9m and £11m – were paying an effective tax rate of just 21%, Advani found. This was slightly less than someone on median earnings of £30,000, whose effective rate was 21.4%.

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.

Support for reform is growing. Labour has indicated it would increase taxes on earnings made from owning shares and investment properties, although the party has yet to set out detailed plans.

Adam Corlett, the principal economist at the Resolution Foundation, said there were “glaring holes” around capital gains which needed to be addressed.

“Thanks to the glaring holes in the capital gains tax system, it’s quite possible for the wealthiest to pay a tax rate of only 10%, or even zero, while low income workers pay much higher rates. That should change,” he said.

The argument against such tax reform is that it might, in turn discourage investment.

Helen Miller, the deputy director and head of tax at the Institute for Fiscal Studies, said there were “good reasons to reform capital gains tax” but added it required a “two-pronged approach” to avoid the risk of discouraging investment.

“[The government] should reform the definition of what is taxed, including by removing some reliefs and adding others, which would allow it to raise rates while minimising distortions to saving and investment incentives,” she said.

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Senators reject bill seeking to to reduce CBN’s regulatory power on FX market

Nigerian senators have rejected a bill seeking to amend the Foreign Exchange Act of 2004 expected to reduce the regulatory function of the Central Bank of Nigeria on the Fx Market.

The bill, titled “The Foreign Exchange (Control and Monitoring) Bill, 2024 (SB. 353),” was sponsored by Sani Musa (APC-Niger), Chairman of the Senate Committee on Finance, and was first read on Tuesday, February 20.

According to NAN, Musa described the bill as crucial legislation intended to repeal the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act, Cap. F34, Laws of the Federation of Nigeria, 2004.

He stated that the proposed law would regulate, monitor, and supervise market transactions and related matters.

He added that the bill will stabilize the country’s foreign exchange market.

“The Bill seeks to stabilize the value of the currency by ensuring the liberalization of foreign exchange transactions to maintain an equilibrium of the balance of international payments.”

However, senators vehemently opposed the bill.

They said it would be counterproductive to CBN’s effort at stabilizing the foreign exchange market.

Senators who opposed the bill are Solomon Adeola (Chairman of the Committee on Appropriation), Tokunbo Abiru (Chairman of the Committee on Banking, Insurance, and Other Financial Institutions), and Aliyu Wadada (Chairman of the Senate Public Accounts Committee.

Senator Ibrahim Dankwambo (APC-Gombe), giving reason for opposing the bill said that passing such a law would confuse Nigerians.

Similarly, Senator Adams Oshiomhole (APC-Edo) pointed out that the senators who had spoken had meticulously summarized and amplified the contradictions and negative implications of passing the law.

Oshiomhole said he believes the bill should not proceed further, as it would effectively take over the CBN’s monetary policy regulations.

The President of the Senate, Godswill Akpabio, urged Senator Musa to withdraw the proposed law for further consultations but the senator declined.

Senator Akpabio then called for a voice vote to decide its approval or rejection for a second reading and the majority of lawmakers voted against it.

The development comes as the Naira recorded its first appreciationp against the dollar on Thursday, exchanging at N1,554.65 per dollar.

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Oyebanji Seeks Belgium’s Partnership in Technology, Agriculture, Intellectual Capacity Devt for Wealth Creation

Ekiti State Governor, Mr Biodun Oyebanji says his administration is building blocks for mutual bilateral relationships between the State and developed countries of the world to turn around the fortunes of its citizens.

Governor Oyebanji made this known during a meeting with the Belgium Ambassador to Nigeria, Mr Pieter Leenknegt at the Belgium Embassy in Abuja, on Wednesday, where potential areas of collaboration were discussed.

Governor Oyebanji who was accompanied by the some state officials, including Commissioner for Budget, Economic Planning and Performance Management, Mr Niyi Adebayo; and Commissioner for Finance, Mr Akin Oyebode, DG office of partnership Biodun Oyeleye, highlighted some critical areas of the State’s 30 – year development plan.

He noted that the state government has a clear vision of opportunities in the areas of ecosystem innovation, technology, renewable energy, environmental management and agricultural production and exportation as well as intellectual capacity development for wealth creation.

“Our vision for Ekiti State is clear. Despite the various challenges, indices and factors being that we are landlocked, we are committed to exploring and leveraging opportunities in ecosystem innovation, technology, renewable energy, and agricultural production. Collaboration with developed nations is crucial for the actualization of our 30-year development plan and ensure sustainable growth and prosperity for our people.”

The Governor highlighted the state’s substantial investments in social programs, commercial agriculture, and various intervention initiatives aimed at boosting the purchasing power of Ekiti’s citizens stressing the necessity of international collaboration to fully realize the state’s ambitious 30-year development plan.

In his response, Ambassador Leenknegt acknowledged Ekiti state’s efforts, which align with global best practices and ECOWAS standards. He advised the Ekiti government to expedite the completion of the state’s airport to improve access and connectivity.

He commended the initiatives behind the Ekiti Knowledge zone noting its potential to transform local knowledge into wealth, expressing Belgium’s interest in partnering with Ekiti State in areas such as communication technology, transportation, and tropical agriculture, including cacao and palm kernel production as well as enhancing academic partnerships between Belgian institutions and universities in Ekiti State.

“We recognize and appreciate the significant strides being made by the Ekiti State government. The Ekiti Knowledge Zone is a remarkable initiative with the potential to turn local knowledge into wealth. Belgium is keen to explore collaboration in areas such as communication technology, transportation, and tropical agriculture, including cacao and palm kernel production.” Said the Ambassador

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NCAA to sanction airlines over deceitful departure schedules

National carrier gets licence today, local airlines fault process

The Nigeria Civil Aviation Authority (NCAA) has condemned what it calls the prevalent cases of deceitful departure time scheduling by airlines, warning the erring airlines to desist from the infraction or face dire regulatory actions.

The Acting Director General, Civil Aviation, Nigeria, Captain Chris Najomo, while declaring this on Tuesday at the Authority’s corporate headquarters in Abuja, said the NCAA now runs a zero-tolerance approach to regulatory infractions.

Speaking through the NCAA Director of Public Affairs and Consumer Protection, Mr. Michael Achimugu, the acting DG warned the airlines to desist from the infraction or face dire regulatory actions.

“He made the ease of doing business the crux of his action plan for the NCAA. In line with that action plan, he has made processes for licensing easy for operators. The time to secure AOC is now shorter and less cumbersome than it used to be in the past,” he stated.

“The NCAA therefore expects reciprocity from airlines. Chief of which is world-class services to passengers.

Najomo said that if the NCAA is making doing business easier for operators, the operators must satisfy the passengers too with superior services.

He said, “It has come to our notice that some airlines are being reported for advertising deceitful departure times. The NCAA regulation says no airline shall display deceitful passenger departure time at its counter, advert material, or on its website.

“We want to make it very clear that the DGCA has directed monitoring and offenders will face serious regulatory actions.”

According to him, the Authority believes in safety, discipline, and economic regulation which is evidenced in the recent suspension of ten PNCF holders for failing to comply with the recertification advisory issued in April 2024.

He indicated that whilst the NCAA supports airlines to be profitable because of their critical value to the economy, it is important passengers are treated fairly.

Speaking about the ease of doing business environment at the NCAA, Capt. Najomo said the ease of business is an area the Authority will continue to improve.

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