The UK wants to plug a $22 billion hole in its economy. One way to do that is to increase the capital gains tax. But the crypto industry warns that it could lead to a brain drain.
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Rachel Reeves is in a pickle.
£22 billion to UK Finance Minister “A black hole“Using capital gains tax to help shore up the nation’s finances puts British business and the tech industry at risk.” warns.
Crypto industry insiders warn that the hike risks triggering a mass exodus of innovative companies.
“This has far-reaching consequences not only for the crypto and fintech sectors but for the wider UK economy,” said Nick Cowan, CEO of VLRM Capital.
The threat is the latest setback for the British crypto industry.
Oversight of the UK’s financial markets has been tough on the industry, new crypto laws have been delayed and the country is struggling with a high cost of living.
Crypto insiders say businesses take this environment into account when deciding where to set up shop.
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If you take all that uncertainty, you say, “Okay, guys, if you do really well and hit the Dreamland IPO goal in five years, we’re going to take 50% of all your profits.” Well, that’s not very encouraging,” Joey Garcia, head of regulation at Xapo Bank, told me.
Tax confusion
Reeves will announce his first budget on October 30.
She wants to raise £40 billion – more than any other budget in history.
Govt says It does not grow Income Tax, National Insurance or VAT.
But it looks set to bring capital gains tax – currently 20% on most assets – in line with income tax, the top rate of which is 45%.
It was a mixed signal from Westminster.
On the one hand, there is Labor Promised To put technology at the forefront of its policies – but to say nothing about digital assets and its stance on crypto.
On the other hand, by raising taxes, the government is said to take a large chunk of the revenue generated by innovation.
Tech lobbyists are alarmed Warned Raising Capital Gains Tax from 20% A high of 39% Drives startups from the UK.
And that hike will hit crypto investors and businesses in particular because it’s the UK’s main way of taxing crypto assets, CryptoUK policy adviser Suzanne Morsfield told me.
It’s not just about taxing cryptocurrency trading profits, she said. Many businesses in the UK are focused on creating blockchain products to help investment banks accelerate trading in traditional assets.
Reeves has to walk a tough line between increasing revenue and promoting business, Morsfield said.
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