The perceived blow struck by Alistair Darling in his pre-budget report last month concerning capital gains tax (CGT) was barely softened in his address at the CBI annual conference today. "I know that my proposals to introduce a single rate of capital gains tax have been controversial. That was inevitable," he said.
The Government's decision to scrap taper relief and implement a single 18 per cent CGT rate has angered many business owners and representative bodies. The CBI has repeatedly spoken out against the changes, as has the Conservative party. There have been specific concerns about entrepreneurs who have spent years growing their businesses to find the tax rate has effectively risen by 80 per cent by the time they wish to retire and sell up.
While Mr Darling has stood resolutely by his decision, there was hope that he would make some concessions in order to regain some support from the business community. During his appearance before CBI members today, he defended his reforms, saying that: "Many have long called for a simplified tax system and have long complained about the complexity of the tax system."
"Capital gains, like any other profits, ultimately come from the strength of the economy. So I believe it is right and fair that they pay their share in tax as a contribution to the economy's future strength," he added.
Although Mr Darling will shortly be reporting to Parliament on the tax, he described the new rate as "among the most competitive in the world", explaining that it is both "less than half the top rate for income" and "less than half what it was ten years ago."
It now appears very unlikely that the Government will completely withdraw the changes announced in October. However, Mr Darling said: "We are working with the CBI and other business organisations to listen to what you have to say. I expect to publish final proposals in the next three weeks."
This will offer business owners little hope and may renew fears of a rush to sell before the reform becomes law in April 2008. "Britain has set up 800,000 more businesses in the last ten years and OECD says the UK has lowest barriers to entrepreneurship of all its countries. I am determined to do everything I can to keep it that way and keep Britain as a good place to do business," concluded the Chancellor.
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