Speaking at the CBI conference today, Chancellor Alistair Darling acknowledged his proposals to overhaul CGT had caused controversy within the business community but said the Government would press ahead with plans for a simplified tax system.
He said simplification was not the easy option but was the right one to do wherever possible.
He told delegates that final proposals will be published within three weeks to clear up doubts about the new regime. These proposals would include any changes to deal with concern in the life industry over the potential damage to insurance bond sales.
Darling said: “Simplication of the tax system is important. Because complexity brings increased costs. I know that my proposals to introduce a single rate of capital gains tax have been controversial. That was inevitable.
“Let me say this on the principle: 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.
“But because we want to reward investment, we are right to now tax gains at a lower rate than income – and the new single rate is among the most competitive in the world, is less than half the top rate for income, and is also less than half what it was ten years ago.
“It is also right to make the system more straightforward and sustainable, with a tax that is easier comply with. I am listening to what you say and will report to Parliament very shortly.”
The Chancellor also defended his actions with regard to Northern Rock saying the consequences for the banking system and wider economy of not rescuing the lender would have been extremely damaging.
He said: “I believe it was right to intervene; that it was right to put in place guarantee arrangements to savers. And it is right to see it through.”