City and Suburban
The signal to sell
Iintend nothing personal when I wonder how David Sainsbury plans to spend next Tuesday afternoon. Mr Sainsbury is the finance director of the grocery business Which his family brought to the stock market 12 years ago. Since then the busi- ness has performed brilliantly, and so have the shares, multiplying in value by 131/2 times. David Sainsbury, as the largest individual holder, now has a personal shareholding worth about £265 million. It IS no business of mine to know what the shares were worth when Mr Sainsbury acquired them, but if they had to be sold today, my guess is that they would land him with a tax- bill of £80 million. So I expect that, as a good finance director, he Will spend Tuesday afternoon tuned in to the Budget, and he could be forgiven for listening with closer attention when the Chancellor gets to the subject of capital gains tax. A year ago Mr Lawson trailed his hopes that his second budget might tackle capital tax as boldly as his first budget tackled company tax. Since then his Political room for manoeuvre may have been eroded, but the stock market still looks for reform. The Budget account has seen some merry share-buying on the story that capital gains tax will be eased, or even abolished. The buyers' instinct may be sounder than their logic. If the Chancellor really wanted to knock the stuffing out of the market, he could find no better means than to do away with capital gains tax. At the top of a bull market which has lasted for nine years, how many investors are sitting on gains which they cannot afford to take? How many would be glad of the chance to pocket the money and run — to nal abroad, perhaps, into heathier tax climates, into lands of seemly secrecy, into currencies which, the dollar excepted, may Still give them fair value for their pounds? As the law now stands, the only reliable way to escape capital gains tax is to die. If the Chancellor now tells investors that they can take it with them in this life, you can be sure that they will. Not all of us will sit down on Tuesday hoping to be relieved of an £80 million tax liability.
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