Sunday, March 19, 2006

Just Abolish the Capital Gains Tax

The EU Commission have now sued Sweden because of Swedish tax rules that allows Swedes who sell their homes and buys a new one to defer capital gains taxation, but only if their new home is in Sweden. This, the EU Comission points out, is a form of discrimination against people who want to move to another EES (EU+Norway,Iceland and Liechtenstein) country. The Swedish government replies that it will not abolish the possibility to defer capital gains taxation because that would reduce mobility, but does not want to extend it to other countries because it will be difficult to follow house transactions and collect taxes in other countries and that extending the right could open to tax planning.

True perhaps, but surely what is good for the state should take a backseat to what is good for the overall economy.

Moreover, because having capital gains taxes in the first place will even with the deferal rule reduce mobility (if people want to move to rented homes) and because capital gains taxes in general discourage investments, the capital gains tax should be abolished altogether.


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