Wednesday, 15 October 2014

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.


Ben Jamin' said...

It's an easy political trap that Ed Balls could set for the Tories.

Ditch the Mansion Tax.

Scrap all those hated "wealth taxes", and end up with one flat charge(don't the Tories love those?) that is less than currently paid by the poorest, Council Tax Band A(1% on average).

Mark Wadsworth said...

BJ, yeah, but the lefties are obsessed with piddly jealousy surcharges like Inheritance Tax or Mansion Tax.

Graeme said...

why not mjust raise the IHT threshold to £1m? The really rich defer it forever and it is just the plebs who pay...and it is a trifling sum of money in the government revenues

Mark Wadsworth said...

G, my avowed policy is to get rid of IHT entirely, not tinker with thresholds and exemptions.