Raising the rate of capital gains tax would have a ‘devastating’ effect on entrepreneurs, Lord Sugar has warned.
The Labour peer and star of The Apprentice attacked the government plans to bring the tax closer in line with income tax.
Lord Sugar, who was previously the Labour Government’s enterprise champion, said an across-the-board rise in capital gains tax would ‘depress’ the desire of people to work hard.
Opening a debate in the House of Lords he said: ‘It will have a devastating effect on enterprising people’s desire to take the lead and set up their own businesses with a view of either floating them or selling them by way of a trade sale.’
‘I know there is a £2million entrepreneurial relief currently in place but in this day and age this amount falls short of the aspirations of real growth companies, particularly those in the technology sector.
‘This payout is the ultimate goal for such entrepreneurs and their loyal employees.
‘Raising capital gains tax rates will not encourage employees of public or private companies who have been incentivised with approved share-option schemes.’
‘It will depress their desire to work hard and the most devastated will be those business or asset owners who have worked honestly and hard all of their lives and are reaching an age perhaps where they are wishing to consider a sale.’
At present, capital gains tax is charged at 18 per cent but proposals put forward by the Lib Dems and included in the coalition deal, could mean the levy is increased to the same levels as income tax.
For a higher-rate taxpayer, this could mean they pay CGT at 40 per cent.
Lord Sugar said any capital gains tax system needed to ‘clearly differentiate between the fast-buck merchants and those who invest sensibly.’
‘The Prime Minster has said that revenues from additional capital gains tax would be used to supplement lifting the income tax threshold,’ he said.
‘I’m sceptical that the maths will work out that way.’
He added there may be an initial ‘windfall’ but it would be ‘simply playing with numbers, window dressing and ignoring the devastating long-term effect on enterprise and unemployment’.
Junior business minister Baroness Wilcox told the debate that further details on CGT reform would be published in George Osborne’s first budget.
But she said: ‘Taxing capital gains made by individuals and trusts helps raise revenue, ensures a fairer tax system and reduces opportunity for tax avoidance.
‘But to be truly effective, the CGT system must also encourage enterprise and support and entrepreneurship.