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21 Jul 2011
A TAX BASED on property to replace council tax and stamp duty has been proposed by a senior Organisation for Economic Co-operation and Development (OECD) economist.
In the August edition of Prospect magazine, Pier Carlo Padoan says that "a property tax based on market values" should be introduced. This would replace stamp duty, council tax and the value of property in inheritance tax and capital gains tax. Padoan says this would "dampen fluctuations in house prices"
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However, Helen Demuth, tax director at accountants Smith & Williamson, told The Telegraph: "The idea of replacing council tax and SDLT with a new property value tax would represent a revolutionary shift in taxation.
"The implications of the changes would be enormous, not just the legislation needed, but consider the need to value every property when the plan to do this for council tax in England is now on the back-burner."
Mike Warburton, tax director at Grant Thornton, told The Telegraph: "Applying a property tax based on market value to a UK population brought up to believe that their home is their castle would go down like a lead balloon. We do not have a history of taxing wealth in this country, preferring instead to tax income and capital gains. Many other countries in the European Union have wealth taxes but they are certainly not popular."
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Visitor comments Add your comment
Kick a dog when it's down!
With the majority of the more expensive properties in the UK being owned by people who have or are about to retire (assuming any of us ever do retire that is)
a tax based on the market value of a property would hit anyone on a fixed or low income very badly.
Also, when interest rates go up what about people overstretched when times were good and who now find themselves in a negative equity situation. They won’t be able to sell and will probably only just manage to afford the mortgage repayments, how would they cope with a large increase in any form of tax. Would they just hand the keys back before the house was repossessed? With the housing market barely limping along, this idea would probably finish it off.
Posted by: Anne Watson, 21 Jul 2011 | 14:36
Postage Stamps or bed-sheets?
Before we get uptight about a proposal for a property tax, let us see it as a Land Tax. How much land does the average UK dwelling sit on? The answer is "almost none". Most land is used for other purposes (but should still be taxed).
I work, I pay tax, I own a little house on a tiny piece of ground. If you took one tax off me and balanced it with a property tax, that would be OK.
But, I would expect those who owned huge chunks of land to pay huge chunks of tax for the privilege. That means all land has to be registered at the government land registry. It means no hiding behind trusts or off-shore companies. It means the super-rich still have to pay. Not just me.
Then it would work, and have the desired effect.
Thanks for reading my comment.
Posted by: Steve, 22 Jul 2011 | 18:59
Maybe the dog needs to stay down
"With the majority of the more expensive properties in the UK being owned by people who have or are about to retire (assuming any of us ever do retire that is) a tax based on the market value of a property would hit anyone on a fixed or low income very badly."
There are was around this. Northern Ireland has a scheme which enables pensioners to defer domestic rates until the ownership of the house is transferred. Also, people can downsize.
"Also, when interest rates go up what about people overstretched when times were good and who now find themselves in a negative equity situation. They won’t be able to sell and will probably only just manage to afford the mortgage repayments, how would they cope with a large increase in any form of tax."
This is completely the wrong way around. If interest rates go up, house prices tend to slow, so the tax would be more likely to fall than rise and the people you mention would be better off under the proposed system, not worse off.
"With the housing market barely limping along, this idea would probably finish it off."
By 'finish it off' are you trying to imply that no one would ever buy or sell a house again, I think you are being unrealistic.
If you are trying to imply that we would never see a return to rapidly increasing house prices, you might be right and that would be a good thing. Nobody talks about the petrol market limping along if it doesn't increase in price for a while; neither should they with houses.
Posted by: Paul Lockett, 22 Jul 2011 | 19:41