property tax

We now have the dubious accolade of being the highest property tax environment in the world

Additional 2% SDLT surcharge for overseas investors – is this dumb or dumber?

I cannot believe my eyes when ‘proud as Punch’, the Revenue confirmed today that the ridiculous SDLT surcharge for overseas investors buying residential property, will be implemented after all.

Cranking the thumbscrew

The Stamp Duty escalator, put into effect by the former Chancellor, hasn’t done enough damage or distortion to the residential property market already, without this further cranking of the thumbscrew.

When this was introduced in 2014, annual Stamp Duty receipts were approximately £12.5billion and the OBR (Office for Budget Responsibility) predicted this would rise to £19.5billion by 2020. Yet today, it is closer to £ 7.5billion for residential sales and no doubt, after this overseas surcharge has had its affect, it will be even less.

Dumb and Dumber…

Now we all know and understand that it appears that the housing stock is finite and we annually now build approximately half the required new homes ie 150,000 (private and affordable) that we need to sustain ourselves ie 300,000, but instead of increasing the supply which brings valuable foreign earnings into this country, the Chancellor, in his infinite wisdom, is trying to curtail the demand by this surcharge tax. Dumb and dumber springs to mind.

… industrial strength constipation

I applaud the Tory administration’s valiant attempts to bypass the planning chicane which, through its petty, political antics, is restricting the supply of new homes by expanding the permitted rights initiative, which allows commercial premises to be changed to residential use, without needing planning consent. However, wouldn’t it be better if there were a ‘Dominic Cummings’-driven root and branch reform of the planning processes of local councils, so that worthy consents pass through this system like ‘a dose of salts’, instead of being blockaded by industrial strength constipation?

In the post-Brexit era, we are going to need our foreign investors more than ever before. Osborne has foolishly withdrawn the non-domiciled tax status for a good number of international residents, which has cost the Treasury at least £ 3billion and isn’t it coincidental that the socialist regimes in France, Italy, Portugal and Spain, have changed their tax laws so as to give these wandering, wealthy refugees, a safe fiscal haven in their respective countries.

They cannot believe their luck. If we, the UK, are stupid enough to expel these cherished wealth creators, they are going to benefit from the inward investment that they bring in truckloads.

Singapore-on-Thames

Why do we consider aping the benefits of being a ‘Singapore-on-Thames’, such an unworthy unmeritorious aspiration? This would attract the wealthiest brains of the world to our shores, in order to benefit from an attractive fiscal environment, much to the chagrin of our former European partners, with their highly unionised and regulated working practices, made worse by their Neanderthal labour mobility, which has been the hallmark of the socialistic continent of Europe for so long, and has reassuringly delivered a permanently high unemployment level of 9%, for their countries.

Doting respect to the Red Wall

Whilst I understand that Boris wants to level the country and pay doting respect to the Red Wall, this should not be mutually exclusive to encouraging investors from abroad to bring their bounty with them, which we need so badly, particularly in the post-Brexit era.

If you said that the government had missed a trick here, you would be the King of understatements.

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Guilt Tax – will it jive?

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’.