- Britain wants to plug a $22 billion hole in its public finances.
- One way to do that is to raise capital gains taxes.
- But the crypto industry warns that this could lead to a brain drain.
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Rachel Reeves is in a predicament.
The tech industry has warned that using capital gains tax to fill a £22bn “black hole” in the country's finances would put British businesses at risk. There is.
Crypto industry insiders have warned that rising prices risk triggering a mass exodus of innovative companies.
Nick Cowan, CEO of VLRM Capital, said: “This could have far-reaching implications, not just for the crypto and fintech sectors, but for the UK economy as a whole.”
The threat is the latest setback for the UK cryptocurrency industry.
Britain's financial markets watchdog has taken a tough stance on the industry, new crypto laws have been delayed and the country struggles with high costs of living.
Crypto sources say companies will take this situation into account when deciding where to set up shop.
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Given all of these uncertainties, we said, “Okay, guys, if you do really, really well and hit your dreamland IPO goal in five years, we'll take your profit.'' We’ll give you 50% of it.’ Well, that’s not very motivating,” Joey Garcia, head of regulation at Xapo Bank, told me.
tax dilemma
Reeves is scheduled to release his first budget proposal on October 30th.
She reportedly wants to raise £40bn, more than any other budget in history.
The government has said it will not increase income tax, national insurance or value added tax.
But it appears poised to make capital gains tax (currently 20% on most assets) equivalent to income tax, with a top rate of 45%.
That amounts to mixed signals from Westminster.
Meanwhile, while Labor has vowed to put technology at the forefront of its policies, it has said little about its stance on digital assets and cryptocurrencies.
On the other hand, raising taxes means that the government is taking a big bite out of innovation revenues.
Concerned technology lobbyists have warned that raising capital gains tax from 20% to a maximum of 39% will lead to an exodus of start-ups from the UK.
And this increase will hit crypto investors and businesses particularly hard, as this is the primary way the UK taxes crypto assets, Suzanne Mosefield, policy advisor at CryptoUK, told me.
She says it's not just about taxing profits from crypto trading. A number of UK companies are focusing on developing blockchain products to help investment banks trade traditional assets faster.
Morsfield said Reeves has to walk a hard line between making money and promoting business.
Contact the author at joanna@dlnews.com.
