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UK Business Leaders Call For Easing Of Tax On Investment

by Robert Lee,, London

23 February 2007

The Institute of Directors has announced that it has formulated affordable proposals that would allow inheritance tax to be scrapped and the capital gains tax regime to be substantially simplified.

In a research paper published earlier this week, the IoD called for change in the tax system so that it no longer deters saving, and placed the elimination of IHT, which it dubbed "a tax on thrift and financial independence", at the centre of its proposals.

The report also stated that capital gains tax should be "radically simplified", with the merger of the tapers for business and non-business assets and complete exemption for assets which have been owned for more than ten years.

“There are overwhelming arguments for making radical changes now," argued Miles Templeman, Director General of the IoD.

He continued:

"Inheritance tax is a threat to an increasing number of people – Scottish Widows have estimated that 40% of households can expect to be liable. The victims will be those who have chosen to save money to ensure that they will not have to rely on the taxpayer in their old age, but who then die earlier than they might have done. Inheritance tax is now a tax on the thrift and financial independence of ordinary working people. It is time for it to be abolished; with some of the tax benefits offset by changes in capital gains tax."

“At the same time, capital gains tax has got into a technical mess. Layer upon layer of historical rules are still relevant and frequent changes have been made to the current system since it was introduced in 1998. Our proposal, to taper all gains and losses down to zero over a ten-year period, would allow old rules and long-term investments simply to be ignored for tax purposes. Gains on shorter-term investments would become very straightforward to compute."

Templeman concluded:

“The cost of the whole package, GBP2.3 billion a year of tax revenue, is small in the context of total tax revenue. And leaving more money in the private sector, rather than taking so much in tax, will not only reduce the extent to which the state has to support people later in life. It will also enhance economic growth, benefiting both the private sector and the public sector.”

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