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No split on capital gains - Cable No split on capital gains - Cable
(40 minutes later)
Business Secretary Vincent Cable has insisted the coalition government is not split over planned increases to non-business capital gains tax.Business Secretary Vincent Cable has insisted the coalition government is not split over planned increases to non-business capital gains tax.
The move could see second home sales taxed at a rate of 40% or 50%.The move could see second home sales taxed at a rate of 40% or 50%.
Senior Tory MPs have attacked it as a tax on the middle classes and a betrayal of Conservative values.Senior Tory MPs have attacked it as a tax on the middle classes and a betrayal of Conservative values.
But Mr Cable told BBC News it was a "key" part of the coalition deal and there was no disagreement over it between the Lib Dem and Tory partners.But Mr Cable told BBC News it was a "key" part of the coalition deal and there was no disagreement over it between the Lib Dem and Tory partners.
Mr Cable, who has stood down as Lib Dem deputy leader, said the changes to capital gains tax would help to fulfil the Lib Dem aim of bringing more "fairness" to the tax system.Mr Cable, who has stood down as Lib Dem deputy leader, said the changes to capital gains tax would help to fulfil the Lib Dem aim of bringing more "fairness" to the tax system.
He told the BBC: "It's very important that we have wealth taxed in the same way as income.He told the BBC: "It's very important that we have wealth taxed in the same way as income.
"At present it is quite wrong and it is an open invitation to tax avoidance to have people taxed at 40% or potentially 50% on their income, but only taxed at 18% on capital gains; it leads to large scale tax avoidance so for reasons of fairness and practicality, we have agreed that the capital gains tax system needs to be fundamentally reformed.""At present it is quite wrong and it is an open invitation to tax avoidance to have people taxed at 40% or potentially 50% on their income, but only taxed at 18% on capital gains; it leads to large scale tax avoidance so for reasons of fairness and practicality, we have agreed that the capital gains tax system needs to be fundamentally reformed."
'Punishing the virtuous''Punishing the virtuous'
Businesses must pay capital gains tax when they sell assets, such as buildings or shares. Non-business capital gains tax is levied on individuals who come into a windfall through the sale of property or shares. Non-business capital gains tax is a tax on the profit or gain you make when you sell or "dispose of" an asset, such as a second home or shares.
Far from taxing the rich, it will simply tax the elderly at their point of maximum vulnerability - when they enter retirement David Davis, Conservative MP class="" href="/today/hi/today/newsid_8708000/8708021.stm">In Full: Cameron interview The aim of the proposed changes is to prevent people diverting their income into these types of assets in order to pay lower levels of tax.
It is set at a lower rate than income tax to encourage entrepreneurs - but many individuals have used it to invest in buy-to-let properties and other assets to plan for their retirement. There are also fears that the move would cause a "fire sale" as property investors try to load off their assets before the new higher rate of tax is implemented.
And it is these people that senior Conservative backbenchers, such as David Davis and John Redwood, say would be hit by the proposed changes. Senior Conservative MPs, such as David Davis, fear the increase will also penalise people who have invested in property or shares for their retirement.
Far from taxing the rich, it will simply tax the elderly at their point of maximum vulnerability - when they enter retirement David Davis, Conservative MP In Full: Cameron interview How capital gains tax works
In an article for the Daily Mail, Mr Davis said increasing the tax risked "punishing the virtuous" and "destroying aspiration".In an article for the Daily Mail, Mr Davis said increasing the tax risked "punishing the virtuous" and "destroying aspiration".
"It will penalise hard work and saving. Far from taxing the rich, it will simply tax the elderly at their point of maximum vulnerability - when they enter retirement," wrote the former shadow home secretary."It will penalise hard work and saving. Far from taxing the rich, it will simply tax the elderly at their point of maximum vulnerability - when they enter retirement," wrote the former shadow home secretary.
Critics also claim that increasing non-business capital gains tax (CGT) too much will actually lead to a reduction in tax receipts as people put their money into other kinds of investment or find ways of avoiding it.Critics also claim that increasing non-business capital gains tax (CGT) too much will actually lead to a reduction in tax receipts as people put their money into other kinds of investment or find ways of avoiding it.
"Unless it is very carefully designed, the plan to increase CGT will not only fail to raise the money needed, it will cost money," added Mr Davis - citing evidence from the US."Unless it is very carefully designed, the plan to increase CGT will not only fail to raise the money needed, it will cost money," added Mr Davis - citing evidence from the US.
But Mr Cable dismissed Mr Davis's argument, saying: "I don't accept the way he puts it. I don't think there are terribly many people who he describes as working class who get very large capital gains."But Mr Cable dismissed Mr Davis's argument, saying: "I don't accept the way he puts it. I don't think there are terribly many people who he describes as working class who get very large capital gains."
Cameron's messageCameron's message
And he insisted there was no real disagreement at the top of government over the changes, which will be announced by Chancellor George Osborne in next month's budget.And he insisted there was no real disagreement at the top of government over the changes, which will be announced by Chancellor George Osborne in next month's budget.
"It's not actually an argument between the coalition partners, as I understand it, it's an argument between a few Conservative backbenchers and others," he added."It's not actually an argument between the coalition partners, as I understand it, it's an argument between a few Conservative backbenchers and others," he added.
He also dismissed John Redwood's proposal to make the tax much lower if an asset has been held for a long time, saying that would be a return to a system that had to be abandoned by the previous Labour government "because it didn't work". He also dismissed Tory MP John Redwood's proposal to make the tax much lower if an asset has been held for a long time, saying that would be a return to a system that had to be abandoned by the previous Labour government "because it didn't work".
Prime Minister David Cameron urged backbench critics to wait for the budget on 22 June and insisted all of their arguments were being taken into account.Prime Minister David Cameron urged backbench critics to wait for the budget on 22 June and insisted all of their arguments were being taken into account.
He said a higher rate was needed to raise the "modest" sums needed to pay for income tax cuts for low and middle earners as part of the coalition deal with the Liberal Democrats.He said a higher rate was needed to raise the "modest" sums needed to pay for income tax cuts for low and middle earners as part of the coalition deal with the Liberal Democrats.
He refused to be drawn on whether the changes would include safeguards to protect people who had invested for their retirement but he stressed that entrepreneurs would be protected, telling BBC Radio 4's Today programme: "We need a country that really fires up entrepreneurship."He refused to be drawn on whether the changes would include safeguards to protect people who had invested for their retirement but he stressed that entrepreneurs would be protected, telling BBC Radio 4's Today programme: "We need a country that really fires up entrepreneurship."
Work and Pensions Secretary Iain Duncan Smith also sought to reassure backbench Tory MPs that their concerns were being listened to.
He said: "I have to say that my own colleagues should worry less and listen more, because I think you'll find that George Osborne is not the sort of person that's going to do any damage to the British economy."


Would you be affected by changes to capital gains tax? What is your reaction to the plans? You can send us your views using the form below.Would you be affected by changes to capital gains tax? What is your reaction to the plans? You can send us your views using the form below.
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