It is perfectly true that property taxes in the UK, when taken as a whole (i.e. Council Tax, Stamp Duty, ATEDS, Capital Gains, Inheritance Tax etc.) are probably one of the highest in the world and this dubious accolade, is endorsed by the august establishment, ‘The Tax Payers Alliance’.
People glibly say that the property taxes for instance, to a New York resident, are far more onerous and penal than our Council Tax, but, on the other hand, it is always misleading when you ‘cherry-pick’ a tax environment and then compare it to another country’s version.
It is perfectly true, that you could pay 1.5 % per annum of the estimated value of a New York apartment, which is significantly more than the average Council Tax charge in the UK. However, American’s do get other, legitimate, benefits which commentators do not talk about.
1. US property taxes are often deductable from Income Tax, or at least this has been the historic position before Trump’s recent tax reforms, much to the chagrin of the New Yorkers and Californians.
2. In Florida, if you live there more than six months of the year, you could qualify for a ‘Homestead’ category, whereby your taxes cannot rise beyond 3% per annum, regardless of market conditions.
It should be noted that instead of paying up to 15% of SDLT, US property buyers pay a transaction tax of approximately 1% of the value, which is a huge benefit and most definitely aids the liquidity of the prevailing market over there. True, there is a Capital Gains Tax on personal, private, residence (PPR), but it can be ‘rolled over’ if reinvested in a new property within a short timeframe. Evidently, there is no such tax in the UK – as yet – but I’m sure the ‘Corbynista’s’ are ‘sharpening their knives’ for this imposition if they gain power at the next Election.
Are there grounds for a voluntary tax?
The lingering question on the minds of the ‘better off’, particularly in London, is: ‘are there grounds for a voluntary tax in excess of the existing higher Council Tax Band for properties above a certain value?’
I would certainly have agreed that an extension to the Council Tax price bands could have been imposed by a Tory administration, had it not been for the legacy of the ‘hapless’ former Chancellor, Osborne, when he effectively doubled the Stamp Duty charges in the autumn Budget of 2014.
I am not sure whether there is an appetite for a voluntary payment or a ‘guilt tax’, given the traumatic effect that Stamp Duty is now having on liquidity.
As we all know, SDLT looms large in the minds of potential property buyers, so that 60% of these have now chosen to stay in their existing properties or refurbish the same. Transactions in the Capital, as a result, are down in certain price sectors by 70% and there is perceptible illiquidity in parts of the Residential Property Market.
The affect of the Stamp Duty ‘hikes’ has ‘gummed up’ the markets which in turn, has had a detrimental effect on retail spending, which is down, and it is unsurprising that as a result, the Economy is growing slower today than was hitherto predicted in the post Brexit environment.
Burden of the many is shouldered by the few
As it is, 2% of the taxpayers fund almost 30% of the tax take. So, you could say that the ‘burden of the many is shouldered by the few’, which as a sound bite, I would have thought should satisfy the most vociferous socialist if not Marxist, politician; hello Mr. Corbyn, are you listening? No plagiarism here, thank you very much.
Quite apart from the staggering ineptitude of the last Tory administration, to demonstrate how imprudent it was to change the UK Non Dom fiscal arrangements, you only have to look at the spanking new tax amnesty being liberally offered by the likes of Italy, France and Portugal, to lure the high net worth individuals to their shores. If we are stupid enough not to make them feel welcome and invest in businesses and jobs over here, what do we expect? These are transient and very resourceful individuals who have contributed greatly to the wealth of this nation.
More you tax production, the less of it is generated
This tax policy has earned the UK Chancellor a ‘mere bagatelle’ but has inflicted huge damage on the inward investment for this country, which is so important for the UK Economy, particularly in the post Brexit era.
The celebrated economist Arthur Laffer was absolutely right when he claimed that ‘ The more you tax production, the less of it is generated’.