Thursday, 4 December 2014

Stamp Duty, Shtamp Duty

1) It's called "Stamp Duty Land Tax" (or "SDLT" for short), not "Stamp Duty", the latter is a 0.5% tax on the sale of shares and is similar in origin but different enough to warrant a different name.

2) SDLT is a very bad tax of course. Although it is a tax on land values, it is not an annual recurring has (which encourages efficient use of land and falls on the unearned element), it is a tax on transactions (thus discouraging efficient use of land). As to the economic incidence, it is born wholly by the seller, but that's a bit academic as two-thirds of people selling are also buying, so it's a huge handful of grit in the system. So it pushes selling prices down, but purchasers don't really benefit.

3) One of people's main gripes with it was the slab structure. So the SNP changed all that a couple of months ago for Scotland (starting next year).

4) The Lib-Cons seem to have done a mish mash of the recent SNP changes and the previous system. Below are two charts comparing the bills under the previous rules; the LBTT rates in Scotland from next year; and the SDLT rates in rUK from today.

The first covers homes up to £400,000, which is nine-tenths of all homes, you can still find an OK family home in parts of London for that much

The second includes all homes up to £2 million, there are only about 100,000 which would sell for more than that. In fact, there are only about 400,000 homes worth more than £1 million. Anybody with that much money (or a house worth that much) clearly has got more than any household could ever sensibly need.

So, to the extent that we should have SDLT or LLBT at all (and we shouldn't), the rUK SDLT system seems a lot more sensible than the Scottish LLBT one, and certainly a tad more sensible than what went before.



9 comments:

L fairfax said...

I heard George Osborne attack the mansion tax today (and LVT as well) by saying it is a tax on the cash poor.
I like LVT but how would you defend that?

Lola said...

LF - go here http://kaalvtn.blogspot.co.uk/2013/01/a-poor-widow-bogey.html

L xx

Lola said...

On the one hand they argue for 'sin' taxes to stop people smoking say. And then the argue for taxes on transactions in the exchange economy. Presumably they think exchanges are sins?

Lola said...

@LF Oh, and GO is economically witless, so what do you expect?

L fairfax said...

BTW Mark and Lola might be interested in the debate
http://www.cityunslicker.co.uk/2014/12/stamp-duty-tax-is-back-to-front.html

Lola

Thanks for the link I will read it.

The Stigler said...

L,

"I like LVT but how would you defend that?"

Why are cash poor people living in expensive places? If you're cash poor, living in London means more expensive groceries, pints, gym memberships etc. Why not move out to somewhere cheaper?

Ben Jamin' said...

@LF

Because it's a user fee, not a "tax".

Is the ability to pay taken into consideration when paying rent or a mortgage?

LVT is rent/mortgage used to pay for public services instead of tax.

Thereby eliminating one set of costs.











fraggle said...

Mark, what is your second graph actually *of*? I can't work it out.

Bayard said...

F, the first graph is a magnified section of the second graph.