Evaluation of Capital Gains Tax Proposals for 2008/09 - Essay Example

There is both furore and appreciation for the reforms from cross sections of the society. This essay tries to explore the pros and cons from various perspectives. The budget elucidated the projection for 2007/8 at 4.6 billion. On the capital Gains front a new tenet was recommended in the name of 'entrepreneurs' relief.' By this way the entrepreneur is given the leeway of paying the capital gains tax at the rate of 10% on capital gains up to the first 1m, instead of the originally proposed 18% The projection for 2007/08 is 4.6 billion. The budget introduces a new tenet in the capital gains tax called the 'entrepreneurs' relief.

' Wherein the entrepreneurs need to pay just 10% on capital gains up to the first 1m, instead of the originally proposed 18% . This calculus of taxing the entrepreneurs makes the entire exercise a bit complicated. Let us first understand the capital gains taxation announced in this budget. Different slabs have been fixed for different levels of business per se. There would be a tax rate of 18% on the sale of assets above 1m whereas 10% on sales of assets up to 1m. This implies that about 80,000 people are expected to qualify for the 10% rate.

Additionally, the gains made on different occasions would also qualify for the 10% rate up to a "cumulative lifetime total of 1m of gains." The Chancellor faces flak on the Capital Gains front . This implies that about 80,000 people are expected to qualify for the 10% rate. Additionally, the gains made on different occasions would also qualify for the 10% rate up to a "cumulative lifetime total of 1m of gains." The Chancellor faces flak on the Capital Gains front from sections of the business community which contend that these changes would not help the business in reality.

The concern expressed by small business owners is that to get the full benefit of the reform one would have to an investment for a lifetime and in no way would benefit those who start a small industry, sell it to start another. Also being debated are the changes made to the existing "Taper relief". This an important area of concern considering the Capital Gains Tax. The taper relief in actuality reduces the body of tax payable on any capital gain on a particular asset business or non-business.

Here again the time factor comes into play because it can be used effectively based on the time of existence of the firm.The other proposals causing stir are the modifications made to the Inheritance law and retirement relief rule. The retirement rule is welcomed by the business persons who wish to retire and sell businesses but not by the persons who do not wish to retire as yet. They haven't been given any concessions or benefits. What may happen is the discouragement of setting up of new small businesses.

The inheritance tax: Inheritance is when a person transfers in whole or parts their assets to an individual or a trust. The tax will become exempt in the scenario when the donor lives for another 7 years after writing of their will and there is the tapering relief in the case the death of the persons occurs between 3-7 years. On the event of death the