Excellent work by Fairer Share

From The Sun:

RISHI Sunak is facing calls to scrap council tax and stamp duty. Households would pay a single property levy under the plan backed by nearly 100,000 people.

The change would benefit residents in the Chancellor’s Richmond, North Yorks, constituency by £650 a year, research by WPI Economics found. Charity Fairer Share, which came up with the plan, said one in four adults regularly borrowed to pay council tax...

The article is light on detail even though the suggestion is very simple. Unsually for The Sun, it is not totally negative. Inevitably, most of the comments are. For more details go to Fairer Share. Which is a community interest company and not a charity AFAIAA.

Give them more money to buy land...

From the DT - of course - https://www.telegraph.co.uk/property/buy-to-let/gone-bonkers-buy-to-let-inquiries-boom-landlords-swoop-stamp/; paywall

The Tories' favourite subsidy. A subsidy to landlords.

Buy-to-let landlords have swooped into the property market to take advantage of the stamp duty tax giveaway.

In a temporary move intended to stimulate the property market in the wake of coronavirus, Chancellor Rishi Sunak last week announced that buyers in England and Northern Ireland would pay no stamp duty on the first £500,000 of their purchases until March 31. Landlords and others purchasing a second home still pay 3pc of the entire value of the property in additional tax, but the tax break means that their bills could fall by as much as half. The savings have persuaded many to return to the market.

Estate agents said the biggest rush of demand had been for homes worth less than £500,000. An investor buying a home worth half a million pounds will now pay £15,000 rather than £30,000 in stamp duty. Buyers in the most expensive parts of the country – primarily London and the South East – will benefit most. Rentround, a letting agent comparison website, said the number of landlords contacting its agents across the country had risen by 22pc. In north and east London, inquiries have risen by 31pc, higher than anywhere else in the country.

David Galman of developer Galliard Homes said inquiries for new build homes from buy-to-let investors since the stamp duty holiday was announced jumped by 40pc compared to the previous week. Over the weekend, Galliard agreed seven sales in its Westgate House development in Ealing, west London, four of which were to investors. “In every single transaction, we included a clause that if the development’s completion goes beyond March 31, we will pay the difference in stamp duty,” said Mr Galman. The tax break for investors comes in stark contrast to the government’s recent buy-to-let policies, such as introducing the stamp duty surcharge on second homes in 2016 and cutting down landlord tax relief.

“It is a game-changer,” said Mr Galman. The holiday is primarily driving small-time investors who are looking to buy just one or two properties – a group that had all but disappeared in the last few years, said Mr Galman. “It’s the doctors, the dentists, the professionals who perhaps have inherited some money to put into a deposit.”

Spencer Fortag, of Dockside Property Services, a Kent estate agent with a sister company in London, said since the stamp duty holiday was announced: “It’s just gone bonkers.” The number of inquiries from first-time investors has jumped by 20pc and now accounts for one in three investor inquiries, up from one in four before the holiday was announced, said Mr Fortag.

The discount some buyers will receive on one property is the equivalent to a deposit on an additional home. “I was chatting to an investor on Saturday who had amassed enough money to buy another property, now the holiday means they can buy two properties in Kent with the same pot of money,” said Mr Fortag. “And the fact that you’re saving between £10,000 and £15,000, that can shift your returns by one or two percentage points."

The holiday is particularly significant for overseas investors. Inquiries from India, China and the UAE, which account for half of Dockside Property Services’ inquiries, are up by a third compared to this time last year, Mr Fortag said. Foreign buyers have a triple concentration of time pressure. As well as the stamp duty holiday deadline, they also face the introduction of an additional two percentage points of stamp duty across the entire value of their purchases in April 2021. Plus, right now, many have a currency advantage, said Mr Fortag.

The so-called “Bank of Mum and Dad” is also making moves. James Holmear, of housebuilder Redrow, said the waiting list for the its Frenchay Gardens project in Bristol jumped by 30pc after a surge in inquiries on Thursday and Friday. Much of this interest has been from investors, including parents buying for their children who are studying at the university. “The extra cash in their pockets due to the stamp duty holiday has tipped them over the edge to make the decision to invest,” said Mr Holmear.

But the new interest has a price cap. After the £500,000 mark the savings become smaller in proportion to a property’s price tag. Martin Bikhit, of Kay & Co, an estate agent that is part of Warren Buffett’s Berkshire Hathaway empire, said: “We have seen buy-to-let investors return to the market but only on properties valued sub £1m and in most cases £500,000.”

Meanwhile, in the cheaper parts of the country, such as the North East, the holiday has a minimal impact. Here, it will save investors £280 on the average purchase, compared to £7,240 in London, estate agents Hamptons International found.

Max Armstrong of North East Property Investments, a portfolio management service, said investor interest had not increased since the announcement, adding that the market had been buoyant since mid-June. “Lots of people have been piling in from outside of the region,” said Mr Armstrong. “We have not bought anything for five weeks as prices have been too high.”

Good news from Australia...

From The Daily Mail:

The Victorian Government is reportedly considering scrapping stamp duty in favour of annual land tax payments. Often considered a growth-killer by economists, [stamp duty] is paid to Australian state governments when a home-buyer purchases a property.

But with a huge decline in the housing market, Premier Daniel Andrews is examining new ways to stimulate the state's real estate sector. While the price of the tax varies in different states and cities, in Melbourne where the median residential home is $819,611, the cost of stamp duty is $46,383.36, according to Core Logic data.

But since the coronavirus crisis began the state's property market has plummeted, leaving a massive hole in their annual $6billion cash cow... Even before the coronavirus derailed the property sector a report by the Productivity Commission in 2019 urged Scott Morrison to ditch the 'inefficient' tax in favour of an annual homeowners' tax.

"Shifting from stamp duties to a broad-based property tax could leave New South Wales up to $5 billion a year better off, while also improving housing affordability," the report said.

"Stamp duties are among the most inefficient and inequitable taxes available to the states and territories. In contrast, property taxes – which are levied on the value of property holdings – are the most efficient taxes available to the states and territories."

Fingers crossed!

Economic Myths: The costs of moving home are a benefit to the economy.

Estate agents and other assorted Home-Owner-Ists have an irritating argument against Stamp Duty Land Tax. Here's a random example from bdaily.co.uk:

“Current stamp duty levels are a tax on free movement in London and it is massively disappointing that the Chancellor has chosen to ignore this. Families who want to buy a family home in London, perhaps moving from one area to another to buy a larger home for a growing family or to be closer to schools or work, are being penalised and many are opting to stay put to avoid paying punitive stamp duty in the £1.5m to £3m price bracket. 

"The upper price brackets of a family home in central London, between £5m and £10m, are being hit with an aggregate of 15 per cent. This has reduced transactions substantially, impacting on the level of tax collected by the Government and is therefore damaging the economy.

"In addition, there is an entire eco-system built around moving house, from removals companies to furniture suppliers, from interior designers to painters and decorators. All these businesses are being hit by the Government’s refusal to reform stamp duty.”

Putting aside the London-centric wailing about people 'trapped' in £1.5 to £3 million homes and the notion that you need interior designers, it is the last bit that rankles.

If those things happen because people are moving home, they are a straightforward cost, they are a loss to the economy. Family A likes plain white walls and Family B likes dark wallpaper. If they swap homes, Family A has to strip the dark wallpaper and paint the walls white; family B has to buy a load of dark wallpaper and stick it up, merely to reinstate the status quo. Net gain to the economy, zero.

It's the broken window fallacy. If the estate agents' argument stacks up, it would benefit the economy if you weren't allowed to take any furniture with you when you move, you'd have to chuck it in a skip and replace it all. More money for the furniture industry! Must be good?!

The real benefit of people moving home is that they are putting land/location value to more efficient use/squeezing more value out of it each time they move.

Let's assume that the two families swap places because Family A lives in town/suburb 1, but most of them have a job/go to school/like to go shopping in town/suburb 2; Family B live in town/suburb 2, but a majority have a job/go to school/like to go shopping in town/suburb 1.

If they swap places, then the two families save in total several hours a day on commuting. They save time, save money, reduce congestion, reduce pollution, have a few more minutes in bed/at home in the evening; are more likely to be at work/school on time etc. Commuting costs ten or twenty per cent of GDP (if you just compare time spent commuting vs time spent at work.school), so hacking it down must be good.

Those are the benefits of moving home, which - we have to assume - by and large outweigh the cost and hassle, or else people wouldn't do it.
------------------------------------------------
All of which is an argument for replacing Stamp Duty Land Tax with Land Value Tax. Instead of discouraging people from putting land (i.e. roads, amenities etc) to more efficient use, it encourages people to constantly weigh the benefits and costs of moving to somewhere more convenient; it increases the benefits of moving and reduces the up front (tax) cost. Whereby an arbitrary tax like that is in itself not a cost - it is the dead weight cost of staying put instead of moving that is a true cost/loss.

The Homeys of course then flip the logic, and wail that Land Value Tax would 'force' people to move home who don't want to. Well duh, it's market forces at work - LVT is only ever as high as it is because some other household is prepared to pay the extra LVT to live there and make the better use of the available amenities.

Life copies satire

Turns out, The Daily Mash was spot on accurate.

From the Evening Standard:

Lucy Pendleton, director of south-west London agents James Pendleton, said: “We had one person whose offer of £358,000 on a flat in Wandsworth was not acceptable at 12.30pm increasing it by £5,000 to £363,000 at 2.30pm.

"That was as a result of the stamp duty relief — the offer was accepted.”

However, there were fears that the change would stoke up the lower end of the property market, making it even harder for less affluent buyers.

"Fears"?

"House prices increase by precisely the amount of stamp duty cut"

From The Daily Mash:

Prospective first-time buyers of a £280,000 London flat, set to save £4,000 in stamp duty, will now find that the flat costs £284,000.

Estate agent Carolyn Ryan said: “I’ve just finished changing all the prices in the windows. “It took two hours actually, so unfortunately we will have to pass that on to buyers as an extra £200 admin fee.”

Read article for punchline.

Reader's Letter Of The Day

The Evening Standard published three scathing letters on the subject of the proposed reduction in Stamp Duty Land Tax "to help hard-pressed first time buyers get on the property ladder", including mine:

There is no doubt about it, a stamp duty cut will feed directly into higher prices, as a seller can increase the price by the amount of the stamp duty reduction, leaving the first time buyer no better off. Exactly the same has happened with Help to Buy, which the large builders have admitted is the main reason for their recent profitability.

Rather than pumping ever more money into the private land market, we would be better served if Help to Buy was scrapped and stamp duty and regressive Council Tax were replaced with a flat Land Value Tax, which is both progressive and efficient.

Mark Wadsworth, Young People's Party

Shit (not to mention pointless and unworkable) ideas of the week

From The Evening Standard:

The influential Institute For Public Policy Research said Mr Khan and other mayors should be put in charge of chairing health and care management bodies and be given tax-raising powers, as in New York, that could include “sin taxes” on sugar, fats and cigarettes.

Ahem, won't Londoners just do "booze cruises" out to the Home Counties?

From the BBC:

Stamp duty should be a tax on property sellers, rather than buyers, to help those trying to buy their first home, a major UK building society has said.

As OnTheOtherHand said when emailed me the link...

... imagine the simultaneous conversation that couples A, B, and C all bidding for the same house in London have after the law is changed:

"Now that the seller is paying £13,171 stamp duty, let's take that money we deposited with the conveyancing solicitor to pay the duty on our behalf, and bid £13,171 more for the property to beat the other couples..."

From The Guardian:

So when Bill Gates pitched into the debate last week with a proposal that robots should be taxed, just like human workers are, you can imagine the splutters of outrage from the neoliberal fortresses of Silicon Valley.*

“Right now,” he said, “the human worker who does, say, $50,000 worth of work in a factory, that income is taxed and you get income tax, social security tax, all those things. If a robot comes in to do the same thing, you’d think that we’d tax the robot at a similar level.”

And the money raised should be used to retrain people the robots have replaced, with “communities where this has a particularly big impact” first in line for support. I never thought I’d write this, but here goes: good for you, Mr Gates.

* Wanker. People working for the "neo-liberal fortresses in Silicon Valley" are already paying a super-tax i.e. the very high rents they have to pay to be able to live within commuting distance of a well-paying job.

To be fair, the rest of that article was a bit more nuanced that the knee-jerk Luddite "tax robots" meme that has been doing the rounds recently and which I intended to take the piss out of.

Gates actually said "you'd think we'd tax the robot at a similar level [to the worker]", which is nothing more than saying that corporate profits (from the automation) and wages (from not automating) should be taxed at the same level, rather than taxing wages at double the rate of corporate profits, which is of course a good idea for many other reasons.

No idea what the "retraining" nonsense is all about, pay people welfare while they're unemployed and pray that new businesses grow and develop and take them on is all you can do.

Tax incidence - the 3% extra SDLT on purchases by landlords

As announced several months ago, there is now an extra 3% SDLT to pay if you buy a home which you want to rent out.

Landlords are buying for the rental income, which is a fixed figure, so the total they are prepared to pay is a fixed figure. The higher the tax, the lower the price the vendor receives and vice versa.

We would expect prices to rise following the announcement and then fall when the tax comes in. Landlords are buying up approx. half of homes, so the fall ought to be approx. half of 3%.

Which is exactly what happened. From Reuters:

On April 1, a three percentage point stamp duty hike was imposed on people buying buy-to-let properties. Estate agents have previously reported dealing with a bottleneck of investors rushing to push sales through before the tax increase on this date.

Rightmove said the average price of a typical buy-to-let property - that with one or two bedrooms - dipped in April by £2,686 month-on-month to reach £182,926, as investors' interest in the market became more subdued.

£2,686 divided by £182,926 = 1.5%.

So, for half of purchases, the landlord buyer is offering 3% less and for the other half the owner-occupier buyer is offering the same as before. Average drop predicted and observed = 1.5%.

Thus where landlords are buying, the extra SDLT is being paid/borne by vendors and not by landlords. This is in the nature of taxes on land values, even crude ones like SDLT. Absolutely none whatsoever is borne by tenants - if landlords could magically charge higher rents to cover the extra SDLT, then prices would not have fallen.

Simples.

Legal and economic incidence of a tax.

From The Evening Standard:

London homeowners are being forced to make dramatic price reductions to sell their properties as George Osborne’s stamp duty shake-up continues to send shockwaves through the market, the Evening Standard has learned.

Nearly one in five homes on the market for more than £1 million has had its price cut in the latest evidence of a slow down since the Chancellor’s new regime came into force.

Yup.

A tax is borne by whoever is less price sensitive - the supplier or the customer. So a tax that goes anywhere near land and buildings is always mostly* borne by the landowner and ultimately by 'the land' rather than 'the buildings'.

It does not matter a jot that legally, the purchaser is obliged to pay it. Any hike in such tax just results in lower selling prices or lower headline rents.

Here endeth.

* Transaction taxes like SDLT or CGT do result in lower supply and hence slightly higher prices/rents, so a small part of these is borne by the customer. Annual recurring taxes are borne entirely by the landowner.

The Laffer Curve in action

From City AM:

Corporation tax rates have been falling globally for decades. In 1981, the average rate across the OECD was 48 per cent. It has now plummeted to 24 per cent. In the UK, the decline has been even more stark, with the rate dropping from highs of 52 per cent to just 20 per cent today...

Despite the reduction in the UK’s main rate of corporation tax since 2010 from 28 per cent to 20 per cent, revenues have remained remarkably resilient. In 2013-14, onshore corporation tax receipts (excluding the volatile North Sea oil and gas sector) were £35.7bn compared to £35.3bn in 2010-11.

In the year so far, onshore corporation tax receipts have been 10 per cent higher than over the same period last year – despite a further two percentage point reduction in the rate. The simple truth is that higher taxes do not always lead to higher revenue.

Also from City AM:

Changes to stamp duty in December’s Autumn Statement mean that homes worth below £1m received a tax cut, but those at the very top end of the price scale have to pay a far bigger levy. Under the tax changes, the average London home selling for £510,000 saw its tax bill cut by £4,900. But a property worth £2.1m saw its tax bill rocket by £18,750.

In the first quarter of 2015, there were 638 prime London transactions, down from 949 in the same period a year earlier – a fall of 33.1 per cent. And the stamp duty haul raised from those sales fell from £125m to £93m, down 25.6 per cent.

Of course, this is City AM, so they pretend that corporation tax and SDLT are the worst taxes; they are bad taxes but far from the worst.

So they seldom mention the Laffer Curve as it applies to the worst taxes VAT or National Insurance; the trick here is to look at total tax receipts from all taxes on economic activity. So while a cut in VAT or NIC rates would no doubt mean a reduction in VAT or NIC receipts in isolation, you have to balance that with increased revenues from income tax or corporation tax (the rather less bad taxes).

(With good taxes there is no Laffer effect whatsoever, of course.)

Legal and economic incidence of a tax (part 94)

For all fucknut Osborne's waffle about his SDLT changes "helping buyers", we are not surprised to see this sort of breathless and hyperbolic do-whattery in The Evening Standard:

Property buyers are demanding huge last-minute price reductions on central London homes following George Osborne’s dramatic shake-up of stamp duty…

Charles Puxley, director of sales in the Chelsea office of agents Jackson-Stops, said: “We had a case in SW7 last week on a property under offer at £3.6 million where a buyer said, ‘The stamp duty is going to cost me that much more — I’m going to reduce my price by £80,000’. It’s human nature that if you have to spend that much more you’re going to take it off the offer. In this case the client refused to accept the gazunder.”

The practice of gazundering — the mirror image of gazumping, when a seller accepts a higher offer after a price was agreed — is a classic sign of a buyers’ market.

A tax on anything is borne whichever factor is less sensitive to price (in terms of quantity supplied or demanded). So clearly, taxes on land, be they annual recurring taxes or transaction taxes, are borne by the seller. Regardless of the price offered, he cannot produce or provide more or less than he has. The buyer can demand larger or smaller quantities.

So this is not a sign of a "buyer's market" or anything else, it is a sign that, er, SDLT has been increased on sales of the most expensive homes. And knocking £80,000 off a £3.6 million bid is not a "huge reduction", it is a 2% reduction, the same amount as the SDLT went up.

Similarly, SDLT has been reduced somewhat on the sales of the other 98% of homes, and we would expect to see prices firming a bit with some gazumping going on elsewhere in the country.

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.

As we were saying yesterday...

From City AM:

BRITAIN’S housing market is inflated by tax rules, which push up prices, and is left vulnerable to booms and busts because of stamp duty, the European Commission (EC) warned in a report yesterday.

Transaction taxes such as stamp duty can cost buyers tens or even hundreds of thousands of pounds on each purchase, forcing them to hold on to property longer than they would like.

"Transaction taxes on properties tend to discourage transactions, which might ultimately make the market thinner and thus hamper the price discovery process," said the report on taxes across the EU.

And the failure to update council tax in line with house prices also pushed up prices, the EC said.

"Failure to update the tax base regularly risks leading to erosion of the tax base — and thus revenue — over time, while giving further support to rising house prices," the report said.

Solutions could include cutting stamp duty – which ranges from zero to seven per cent, depending on the sale price – and reforming council tax to make it more progressive and more in tune with the current housing market.

Correct. SDLT at higher rates and IHT (bad taxes as they impede transactions and/or are jealousy surcharges and/or semi-regressive) primarily collect that element of land values which are unaffected by Council Tax (bad tax because it is regressive to the point of being a Poll Tax).

So why not merge the three into a flat tax on land values or house prices? We could call it "Domestic Rates" or something. Once you start along these lines, you realise that there are plenty more of these stupid little taxes on wealth or transactions which we could chuck into the mix, to the overall benefit of everybody.

Readers' Letters Of The Day

Both from today's Evening Standard (page 57):

MY wife and I hope one day to move to NW5. While we could never afford the £2.5 million price tag on Ed Miliband's Dartmouth park residence, I agree with him that its valuation is driven by lack of supply. This needs to be addressed by achievable means: new housebuilding can only do so much where urban land is limited.

Like the Milibands, my wife and I were in the privileged position of both owning a London home prior to our marriage. The problem with selling these to buy our dream is the cost associated with moving: £100,000 in stamp duty, agents' and legal fees. Barriers to moving could be reduced and supply increased by scrapping stamp duty. The lost revenue would be recouped with a bump in council tax for all.

Increasing the annual cost of ownership in this way would create an incentive for home owners to rent out their unused space - not only a handful of foreign investors but all those living in large London homes.

Surely it's reasonable for them to pay the social costs of their living choices?

Timothy Wiffen, SW11.

WHEN house prices rose at over £1,000 last year, the impact of doubling council tax for a Band D home as a means of tackling enmpty properties will be minimal.

The fact that council tax on meag-buck mansions is barely more than that on a Band D home also needs addressing.

David Reed.

"Stamp duty thresholds have saved home buyers £260m since 2012"

From City AM:

STAMP duty is helping to cool the housing market, saving buyers over £260m in the past two years, according to analysis from property website Zoopla.

Research conducted by the website demonstrates the effect of the “dead zone” for stamp duty. Since the tax rises on the price of the whole property if it edges over £125,000 or £250,000, prices are bunched just below the thresholds, saving buyers money.

The firm suggests that buyers have been able to acquire around 37,000 properties for a slightly more modest price to avoid the slab system of duty since April 2012. The duty means that if a house costs £249,999, the whole value is taxed at one per cent, whereas if it costs £250,001, it is taxed at three per cent.

Because of this effect, 25,109 more houses than expected were sold for just under £250,000 during the period, and 6,413 more than expected for just under £125,000. At the £250,000 mark, Zoopla says that the average price reduction is saving buyers £7,176.

“The current stamp duty system helps dampen price rises and helped thousands of buyers from having to overpay for their property,” said Zoopla’s Lawrence Hall.

"The actual stamp duty saving is probably as much again. What's not to like?"

A smaller profit is not "a huge loss". You twats.

From The Evening Standard:

Research today revealed how the "Stamp Duty Dilemma" forced 14,000 UK homeowners to sell properties at a huge loss last year. The study also shows current stamp duty rates left a further 10,000 homeowners unable to sell their property at all.

The organisation behind the research says the stamp duty threshold, which hits buyers with a £7,500 tax bill when purchasing a home over £250,000, is massively outdated and should be reformed…

The research concludes that rising prices mean 73 per cent of all properties on the market now sit just under the £250,000 threshold — 50,000 more homes will reach it in the next five years.

That "73 per cent... just under... £250,000" suggests they are talking about the London housing market, and nearly everybody selling in London will be selling at a colossal gain. Even if not, the "rising prices" they refer to certainly will*. Not a huge loss.

Naomi Heaton, chief executive of London firm LCP which commissioned the study, said: "When they decide to sell, they will be faced with a very tough decision, the Stamp Duty Dilemma — to sell at up to a £10,000 discount? Or not to sell at all..?"

There's no need for any discount at all, and certainly not one larger than the £7,500 mentioned above - the issue is largely psychological and all the cunning seller has to do is to offer to pay the SDLT for the purchaser, which is perfectly legal and do-able.

So the seller can happily sell for (say) £260,000, and pays the £7,800 SDLT himself, thus netting £252,200 i.e. more than £250,000.

"The first course of action means the homeowner may be treading water when they buy a new property as they are unable to trade up. The second course of action is inaction. Either way, the doors remain firmly closed to first time buyers."

The same logic applies to the next home in the chain; the person who has sold his own home (having paid the SDLT himself) can request the same from the next vendor. Or do his sums properly and take the SDLT on the chin.

As to "the doors remaining firmly closed to first time buyers" this makes naff all difference; if more people were selling houses then they would be an equal increase in the number of people looking to buy houses.

* Of course, there will be some vendors elsewhere in the country who are selling at a loss because prices have fallen - but they get two consolation prizes - the SDLT on their next sale/purchase is smaller and it's cheaper to trade up.

Institute of Fiscal Studies on top form

Apart from the irritiating use of the word "property" when they mean "residential land and buildings", of course.

From their Green Budget 2013, Chapter 9:

Far from looking to raise more money from SDLT, the government should be looking to reduce SDLT or preferably abolish it altogether and make up the revenue elsewhere – perhaps from a reformed council tax in order to avoid giving out windfall gains to owners of high-value properties... A sensibly reformed council tax, increased to make up the revenue from abolishing SDLT, would make for a much more coherent system for taxing property...

The taxation of housing is a mess. There is no good argument for taxing housing transactions, as stamp duty land tax does. There are good arguments for levying a tax on property values – but not for charging a lower percentage tax rate on high-value properties and basing it on valuations that are 22 years out of date, as council tax does.

Increasing council tax rates for high-band properties would go some way towards making council tax more proportional to property values, but it would be better to conduct a full revaluation and make a reformed tax fully proportional to those up-to-date valuations, preferably replacing the revenue from an abolished SDLT in the process.

OECD talkin' sense

From FT Adviser:

OECD economists speaking at the launch of the OECD's report, Housing and the Economy: Policies for the Renovation, said the abolition of stamp duty would reduce barriers to entry in the housing market. Asa Johansson, OECD economist, said stamp duty should be replaced with an increased council tax where part of the funds went to local councils and part to the Treasury.

She said: "I think stamp duty should be removed and replaced with a property tax based on the value on the house. It adds on costs for people entering the market."

Ms Johansson proposed replacing stamp duty with a yearly tax, similar to council tax but with part of the funds going to the council and part to the Treasury. She acknowledged such a tax would have the most impact on those home owners who are asset rich and cash poor but said a revised taxation system would be fairer as it would not penalise those who engaged in property transactions.

The OECD also urged the government to tax vacant land to incentivise owners to develop the land and build property on it.

Dan Andrews, OECD economist said: "The current property tax base should be updated to better reflect market values. This would provide more incentives to use vacant land which could help alleviate some of the supply side problems in the UK housing market."

Spotted by Jack C at HPC.

It's a bit long-winded, but the conclusion is excellent

From the Institute for Fiscal Studies/Mirrlees review of UK taxation, Chapter 16:

16.4 Conclusions

The taxation of property [a term incorrectly used to refer to 'land and buildings'] in the UK is currently something of a mess. As we have seen when considering the practicalities involved in implementing an ideal system, up to a point that is understandable. But it remains both desirable and feasible to clear up much of the mess. Out conclusions can be summarised thus:

* There is a strong case for introducing a land value tax. The priority should be to use it to replace the economically damaging business rates system.

* Council tax should be reformed to relate it more closely to actual property values: levied as a proportion of up-to-date values with no cap and no discount for unoccupied or single-occupancy properties. We have called this a housing services tax to reflect its underlying economic rationale as a tax on housing consumption to substitute for VAT.

* [bullet three is arcane to the point of being gibberish]

* Finally, stamp duty land tax should be abolished and the revenue replaced as part of the housing services tax (for domestic property) and land value tax (for business property).

This is a radical set of proposals, and the changes would need to be phased in carefully. But this is also an area where the current practice is a long way from an economically rational and efficient system. Stamp duty and business rates defy the most basic of economic principles by taxing transactions and produced inputs respectively. Income tax and capital gains tax create a significant bias in favour of owner-occupation.

Meanwhile, council tax is indefensibly regressive and, thanks to spineless government refusal to undertake a revaluation, we find ourselves in the absurd position that tax bills are still based on relative property prices in 1991. Over time, this arrangement will some to be seen as more and more untenable. At some point, some government will have to grasp the challenge of making the case for intelligent.
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1. The 'housing services tax' they refer to is a copy of the new system of Domestic Rates in Northern Ireland, i.e. a flat 0.6% per annum on up to date capital selling values, which they would have instead of Council Tax/Council Tax Benefit. The include a chart on page showing that only owners of houses worth £500,000 or more (which is the top five per cent of houses by value) would be more than a couple of hundred quid a year worse off. An excellent place to start.

2. Stamp Duty Land Tax is 3% on sales of homes for £250,000 - £500,000, and 4% on sales of homes for more than £500,000. If there's a sale every twenty years, it costs owners of houses worth more than £500,000 about 0.2% a year on average (i.e. £1,000 a year for a £500,000 home; £2,000 a year for a £1m home etc). To replace SDLT, we'd need to increase the 0.6% rate by +/- 0.1% a year (on all properties).

3. They don't mention Inheritance Tax in the chapter, which is 40% on the total value of most assets (in particular housing, cash and quoted shares) in your estate above the threshold of currently £350,000-odd. Let's assume this is payable once every forty years, to replace this would mean hiking the rate by another +/- 0.1% (on all properties).

4. Owners of second homes would be a bit miffed with all this, so it'd only be fair to scrap Capital Gains Tax on land and buildings liable to the 'housing services tax', for much the same reason as the arguments against SDLT. This would mean hiking the rate by another +/- 0.1%.

5. At this stage, owners of expensive houses and/or second homes can be pretty satisfied with the outcome - what they lose on the Council Tax swing, they more than win back on the SDLT, IHT and CGT roundabouts.

6. But owners of the vast majority of houses that aren't liable to 3%/4% SDLT every time they are sold, which are beneath the Inheritance Tax threshold and/or which are not second homes would end up one or two hundred quid a year worse off with an 0.9% rate. So let's just go the whole hog, round up the rate by another 0.1% to a nice round 1.0% and scrap the TV licence fee instead (currently £142.50).

Job done.