It would be better to tax IP protection, inheritance, resource use and land only but realistically if we get rid of capital gains the tax burden will land squarely on wage earners doing all of the actual work who are already taxed more than the people who own their productive output.
EU countries already realize it's the case with IT services (everyone wants their share with digital tax) and with big supermarket chains (big issue in Poland). It's just painfully slow for them to connect the dots and introduce a general solution.
Every one of those "solutions" is just a patch on the basic problem that consumption taxes are fundamentally regressive.
Go tell someone living paycheque to paycheque that it's okay, you'll get a rebate every quarter for the extra tax they paid, or worse, on their annual tax filing, and tell me how that'll make their household budget actually work.
Honestly, when I read ideas like this, I realize just how massive the disconnect is between the lived experiences of the relatively well off and the working poor...
There are arguments to be made against heavily taxing consumption to encourage economic activity, but you're oversimplifying this by disregarding the indirect costs of alternatives and looking for problems instead of solutions. Not that I think the one you commented on is a good one.
A billionaire who spends 0.2% of their wealth every year, paying a 100% consumption tax on that would still have a vastly lower relative tax burden than somebody who spends their whole paycheck but only pays 50% consumption tax.
Why is it just assumed that regressive taxes are bad?
Top 5% by income in USA pay 60% of income tax. It is NOT the run-of-the-mill wage earners who may most, not even close.
- No PIT on dividend income, which is fair since CIT has already been paid on the money earned by the firm(and paid bt by you as a shareholder in that firm)
- CIT payable only on dividend distribution, not yearly so if a firm keeps on re-investing in the firm paying salaries/suppliers and investing in growth they don't pay any CIT.
Another side effect of 1) is that it would cause companies to distribute dividends rather than doing stock buyback since dividend would have a lower tax rate(0%) than the STCG/LTCG tax rate on stock appreciation.
This is how estonia does it, so we already have some data on effectiveness of this.
You can tax business at home by land/revenue/resources usage/ip protection taxes. As it is owners in different jurisdictions pay a different (or sometimes no) tax on selling shares. Selling itself is something you want to encourage, not discourage. It's a pointless tax that penalizes exactly the things you want to encourage.
You think that someone moving to Portugal to avoid it is unfair but then a share holder living in 0 cap gain jurisdiction in the first place would pay 0 anyway.