June 18, 2010

Business group urges Chancellor not to raise taxes in next week’s budget

by Kay Mitchell

Chancellor George Osborne will unveil his emergency budget next week and tax hikes are expected.

However, according to business group, the British Chambers of Commerce (BCC), “punishing” tax rises could hit economic growth.

A rise in capital gains tax (CGT) is expected. This is the levy firms or individuals pay on the profit gained from selling assets. It is currently set at a flat rate of 18%.

The business group also warned against VAT and national insurance rises. VAT could rise from its current 17.5% to 20%, according to many economists.

David Frost, director general of the BCC, comments: “The Chancellor must tread carefully to avoid introducing damaging new taxes that negatively affect private-sector growth.

“Short-term revenue gains would be outweighed by longer-term economic consequences, from reduced business investment to lower rates of job creation. Any tax rises must be focused on consumption taxes rather than payroll, income or profits,” Mr Frost continued.

However, he believes tax hikes could be harmful to SMEs and measures to reduce the UK’s deficit should come from public spending cut.

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