The Budget: what business wants
BUSINESS leaders in Birmingham have been making their predictions ahead of next week’s Emergency Budget.
The Chancellor George Osbourne MP is due to address the House of Commons at 12.30pm on Tuesday with details of the new coalition Government’s economic plans for the country.
Experts at PricewaterhouseCoopers in Birmingham believe capital gains tax rates could vary for short or long-term investment.
The tax rate on the disposal of non-business assets is expected to be increased in line with income tax rates, PwC says, which could mean an effective rate on CGT of up to 50%.
Head of tax at PwC in the Midlands Barry Smith said: “In an effort to discourage more speculative activity, we believe there may be differential capital gains tax rates depending on whether an asset has been owned for the short or long term.
“It is possible that any new short-term rate, which could apply to assets held for less than two years, could take effect immediately from budget day.
“This could help increase revenue for the Chancellor as short-term gains are immediately taxed at a higher rate and individuals would then have the choice of keeping or disposing of assets.
“A differential rate for longer term holdings would also deal with the problem of how to grant relief for purely inflationary gains.”
Other PwC predictions include an increase in the personal tax allowance to a £10,000 threshold and possible changes to the tax credit system, which could be capped at a set amount based on household income.
Birmingham Chamber of Commerce and Industry says the brunt of the tax burden should fall on consumers not businesses in the Emergency Budget.
The chamber believes that business will not escape pain but endorses the need for George Osborne to cut the deficit.
Head of policy Katie Teasdale said: “The Emergency Budget will lay out the challenges ahead as the Government tackles the structural deficit.
“We hope it will provide a clear statement on the Government’s plans for the UK tax regime – tackling the uncertainty which has arisen as a consequence of swirling rumours around capital gains tax and VAT rises.
“Businesses do not expect to avoid pain on Tuesday. Even the current compromise on National Insurance contributions will cost business between £2bn and £2.5bn in 2010/11.”
The Institute of Directors West Midlands is calling for a cash squeeze in public spending from next week’s budget.
It warned: “With the right decisions prospects for recovery in the short-term and economic growth in the long-term could be enhanced. But there is also a risk that the wrong decisions could hasten a double-dip recession and damage long-term competitiveness.
“Closing the structural deficit alone is not enough. The overall deficit in public sector net borrowing needs to be almost eliminated.
“The IoD has consistently argued for a 4:1 ratio of spending reduction to tax increases. Ideally all of the adjustment should fall on spending but if taxes are to rise the focus should be on indirect taxation.”
