When is a business asset not a business asset? That’s the British Chambers of Commerce's worry about rumours that the Government plans to raise capital gains tax from 18% to 40%. Although George Osborne has promised the rise would only affect ‘non-business assets’ like shares and second homes, the BCC says it’s worried the Treasury won’t be able to distinguish between the two. With the chorus of opposition getting ever louder (even Lord Sugar has waded in today, though don't let that put you off) will the Chancellor be forced to back down before next Tuesday?
In its submission to the Treasury before next week’s Budget, the BCC said the change could constrain the private sector recovery, and would send out a message that ‘we are a high-tax country’. If investors weren't already put off by the strictures of the the Budget and the 50% income tax band, it said, a big hike to CGT would act as a further deterrent. And it may have a point: the average CGT rate among the 30 members of the OECD is 15%, while some, including Germany and (conveniently handy) Switzerland, don’t have CGT at all.
David Cameron has been desperately trying to defend the plans, telling the BBC that the UK is losing ‘about £1bn’ a year because investors are using the current system to avoid the higher rate of income tax. But the campaign against the proposal - backed by senior Tories like David Davis and John Redwood - continues apace. Newspapers are trying to outdo each other in their indignation: apparently 17,400 Daily Telegraph readers have signed up to a petition claiming that solid citizens with modest incomes but a ‘lifetime of prudent savings’ will be hit the hardest.
As if Cameron didn’t have enough to worry about, everyone’s favourite TV entrepreneur has decided to get involved, too. In his usual calm and measured way, Lord Sugar - a Labour peer, lest we forget - has accused the Government of having an ‘alternate agenda’ for the rise. Apparently, they’re attempting to generate a ‘fire sale of assets’, with the aim of creating a revenue windfall so they can ‘boast about how well they are doing in reducing the deficit’. The idea of a CGT rise, he says, is ‘shallow, short-term thinking and window dressing’ (all of which he should be fairly familiar with from the Apprentice).
Such is the pressure from critics that there are now whispers George Osborne will make substantial climb-downs on the plans during his Budget announcement next week. He’s treading a difficult line, though. Both the coalition partners used their Election manifestos to champion their commitment to entrepreneurs, so they're unlikely to disagree on that point. But the Lib Dems seem much keener on the CGT clampdown than most of Osborne’s Tory backbenchers. So he's likely to upset someone, whatever he does.
In today's bulletin:
Hayward survives seven-and-a-half-hour kicking from Congress
Network Rail boss unexpectedly quits as bonus showdown looms
CGT rise will hurt the recovery, says BCC (and Lord Sugar)
Letters from Malawi: Four hours of stamp duty
My Week: Michelle Dewberry of Chiconomise