Mr. McDowell highlighted the impact of tax rates on revenues, stating that by reducing the CGT rate from 40% to 20% in 1997, the government saw a staggering 500% increase in revenue, demonstrating the counterintuitive relationship between tax rates and tax income. He pointed out that this observed behavior should prompt a rethink regarding tax structures and their broader implications for social justice and government funding.
Mr. McDowell expressed concerns about the current CGT rate of 33%, arguing that it discourages compliance and encourages tax avoidance through emigration. He noted instances of individuals relocating to Portugal specifically to escape capital gains taxes, illustrating a significant issue where taxes lead to a loss of revenue and social equity.
Reflecting on the ideological debates surrounding taxation, Mr. McDowell emphasized the pragmatic need for finance ministers to balance revenue generation without excessive public dissatisfaction. He stated: 'It's long been stated that the art of being a finance minister is to be able to pluck the goose without it squawking too much,' underscoring the need for effective tax policy.
Concluding his remarks, Mr. McDowell acknowledged that while he did not expect a return to an increase of 500% in revenue by cutting the CGT from 33% to 20%, he was confident it could yield 'a two or three-fold increase,' reinforcing the argument that strategic tax reductions could lead to greater overall tax revenues.
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