Rumours of a raid on capital gains have already sparked a rush to sell property and shares.
Telegraph analysis shows executives at Britain’s biggest companies have sold more than £1bn of shares since the election was called, ahead of an anticipated capital gains tax (CGT) raid by Rachel Reeves.
CGT is paid on profits made on investments such as shares and certain property. The rates paid currently range from 10pc to 28pc.
Bringing them in line with income tax could leave some investors facing rates of 45pc.
The IFS claimed wholesale reform of the system would be “more growth-friendly” for the country.
However, businesses have warned that the move would deter risk-taking and entrepreneurship, while others would simply hold on to their assets until taxes fell again.
The IFS also recommended introducing what tax experts have dubbed a “double death tax” by removing a relief known as “uplift on death” that means that no capital gains tax is levied on the investments’ of someone who has passed away when they are liable for inheritance tax.
The think tank also called for the end of business asset disposal (BAD) relief, which currently gives entrepreneurs a lower CGT rate of 10pc on up to £1m of gains made from the sale of their business.
“With a reformed tax base, tax rates should ultimately be aligned across all forms of gains and income,” the IFS said. “This would involve significant increases to CGT rates.”
CGT raises an increasing amount of revenue, with £15bn paid by roughly 369,000 people last year. The IFS noted that two-thirds of revenues come from just 12,000 people who have average gains of £4m.