Thursday, February 25, 2010
In an open letter to the UK Chancellor, Simon Walker, Chief Executive of the British Private Equity and Venture Capital Association (BVCA), has urged the UK government to maintain a stable and competitive tax framework, especially on capital gains.
In order to ensure the UK preserves and reinforces its position as the centre for European private equity, venture capital and entrepreneurship, Simon Walker wrote that the UK tax system should:
Walker thought that, in recent years, the UK had not performed well on these measures. In particular the incoming 51% (rising to 52%) effective top rate of income tax was already high, without compounding it with further increases in the rate of Capital Gains Tax (CGT).
This, Walker believed, would be deeply damaging to the UK. The relatively low and stable rate prevailing in the UK had been successful both at encouraging enterprise and raising revenue. An increase in the rate would, according to the BVCA, lead to lower tax revenues as transactions would be put on hold, and it would send a very negative message internationally about the UK as a place in which to base and grow a business.
The BVCA claimed that an increase of a few percentage points, for example, would push the UK down the league table of international competitiveness, from a current mid table position, to somewhere near the bottom. The government was urged not to increase CGT in the upcoming Budget.