In response to the Chancellor’s decision on capital gains tax (CGT), which were announced last week, George Osborne has said the Conservatives believe “there’s a good prospect to force them [Labour] into a U-turn”.
The Government’s decision to eliminate taper relief and levy a single rate of 18 per cent on CGT has surprised and angered many in the business community. Even one of the Prime Minister’s supporters, George Mudie, believes it would be better for the Government to postpone the CGT decision and to rethink the policy.
Mr Osborne added his concerns to these, saying the change would have “a serious, dynamic effect in the economy in a negative sense”. The opposition party has pledged to fight the proposal and, if unsuccessful in this aim, says it will vote against the reform in the 2008 Finance Bill.
And Damien Reece’s comment in the Telegraph expressed utter dismay at what appears to him a backward step from Gordon Brown whose taper relief policy, introduced in 1998, showed the Government’s determination to encourage entrepreneurs.
“To now allow his successor, Alistair Darling, to reverse that piece of social engineering is as outrageous as if he had repealed policies to help the old, the infirm, or the underprivileged,” he said.
Despite the volume of complaint, Mr Darling is standing by his decision, saying “a single rate of capital gains tax is the right thing to do”.
“Although I accept some people are not happy about it, others have welcomed the proposal, and therefore I intend to proceed with the charges,” he added.
Supporters of the reform would suggest that the taper relief system is not a practical measure in the first place as it is almost impossible in some cases to distinguish between business and non-business assets. Others have pointed out that the new 18 per cent rate is far more acceptable than expanding the current 40 per cent upper CGT limit to all those paying the tax.
Find out more about taper relief
and capital gains tax
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