The UK tax system favours capital gains. Is it an outlier?
The recent publication of Rishi Sunak and Keir Starmer's tax returns brought into focus the large difference between the marginal rates of tax on employment income (47%) and capital gains tax (20% for shares; 28% for real estate). Many people propose closing this gap. But how unusual is it in an international context?
I’ve written a short article at the position across the OECD. The surprising answer is that our CGT rate is somewhat low by international standards, but the rate of income tax on dividends is surprisingly high. And, if we take all employment tax into account, the UK differential between tax on employment income and tax on capital gains looks unexceptional.