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Last Updated: Thursday, 11 October 2007, 12:57 GMT 13:57 UK
CBI pans chancellor's tax changes
CBI boss Richard Lambert
Richard Lambert, head of CBI, used to be editor of the Financial Times
Tax changes will hurt British business and create a risk for the wider economy, the Confederation of British Industry (CBI) has warned.

In a letter to the chancellor, CBI boss Richard Lambert said that scrapping taper relief on capital gains tax will make business owners worse off.

The measures were announced earlier this week in the pre-Budget report.

The letter was also signed by bosses of 12 firms and the CBI's small and medium sized businesses' enterprise council.

The government's plans mean that all capital gains will be subject to a flat 18% charge.

This replaces a more complex system in which the rate could vary between 10% and 40% depending on the type of asset and the length of time it had been held.

'Blunt instrument'

The changes were aimed at tackling wealthy individual involved in private equity but Mr Lambert said the reforms would discourage small and medium size businesses from investing, and also hurt the economy.

"By removing taper relief you have deployed an extremely blunt instrument that will deeply damage a much wider community, and in doing so, risk the medium-term health of our economy," Mr Lambert said.

Taper relief meant that those who held on to assets for longer would pay a lower rate of capital gains tax when they sold the relevant assets.

"In other words, whether you build a business up over 30 years and then dispose of all or part of it, or whether you buy a bunch of shares at 0900 and then sell them at a fat profit at 1000, you'll now pay exactly the same 18% rate of tax," said Robert Peston, the BBC's business editor.

Mr Lambert called on the chancellor to take urgent action to get the enterprise agenda back on track and recognise the contribution entrepreneurs make to the economy.

Chief secretary Andy Burnham defends tax changes

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