Friday, 18 April 2014

"London's first-time buyers caught in ... trap, research shows"

The Evening Standard is at its Homey best again. They publish a handy contour map showing how minimum selling prices rise from the outer suburbs to form a peak in the City, which would be of no surprise to anybody who takes an interest in land values*... and then they wail on about the "stamp duty trap":

Yes, Stamp Duty Land Tax, like all taxes on transactions (such as VAT, PAYE etc) is an awful tax, but what costs you more? The SDLT or the home?

* The increase in land values towards the centre is far steeper than the map suggests, because the centre is much more densely built up than the suburbs. It's easily a ratio of a hundred-to-one between the centre and the outer fringe.


James James said...

Remember that income tax is also a tax on transactions. Perry much all the inefficient taxes are. LVT and poll taxes aren't.

Mark Wadsworth said...

JJ, yes, to some extent.

But at least income tax or corp tax is levied on the sum total of lots of little transactions carried out over the year, some of which make profits and some make losses.

FUll-on transaction taxes like VAT or SDLT or NIC tax a transaction there and then whether it actually leads to a profit or a loss.

So income tax or corp tax do not turn a good decision into a bad decision, they just reduce the profits from good decisions and reduce the loss from bad decisions.

VAT, SDLT and NIC actually turn good decisions into bad decisions. They turn profitable things into loss making things.