Business

Capital gains tax should not rise, business group warns

Pound notes
Image caption The BCC says a rise in capital gains tax could hit the economy

The chancellor should avoid introducing "punishing" tax rises which hit economic growth, the British Chambers of Commerce (BCC) has said.

The BCC said it was concerned that George Osborne could use next week's Budget to unveil a rise in capital gains tax.

This is the levy firms or individuals pay on the profit gained from selling something they own, such as shares.

However, the TUC union group is calling for capital gains tax to rise.

'Tread carefully'

UK capital gains tax is currently set at a flat rate of 18%, but the coalition government has indicated that it wants to bring it more in line with the various income tax levels.

"The chancellor must tread carefully to avoid introducing damaging new taxes that negatively affect private-sector growth," said BCC director general David Frost.

"Short-term revenue gains would be outweighed by longer-term economic consequences, from reduced business investment to lower rates of job creation."

However, the TUC says capital gains tax currently allows the rich to avoid paying their proper share of tax.

"The vast majority of taxpayers never come into contact with capital gains tax as they are simply not wealthy enough to buy and sell the assets that bring capital gains," said TUC general secretary Brendan Barber.

"But most will find it incomprehensible that they pay more tax on the wages they earn from putting in a full day's work than the wealthy do from sitting back and watching their assets increase in value."

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