You are here: Home - News -

Mansion tax “unfair and costly” – think tank

by: Mortgage Solutions
  • 05/03/2012
  • 0
A mansion tax would be complex, inefficient and raise little revenue at a high cost, a think tank has warned.

Liberal Democrat plans being considered by Chancellor George Osborne have called for the introduction of an annual mansion tax of 1% of a property’s value above £2m.

However, a report from the Centre for Policy Studies and Savills said that the tax would be unfair to people whose incomes have not risen as fast as their property values and would hit those who are “asset rich, but cash poor”.

The report warned that a tax of 1% of the property value over £2m would yield “at most” £1bn or 0.2% of total tax revenues, while top-end property owners already make a disproportionately high contribution to tax revenues.

It highlighted that the highest 1.6% of residential property sales yielded £1.2bn and were equivalent to 26% of all Stamp Duty reciepts, while the 5% Stamp Duty band introduced last year for properties over £2m will contribute a further £290m a year.

The report added that a mansion tax would undermine London’s position as one of the world’s leading business locations.

“If only a handful of the new class of international wealthy were no longer to come to Britain, the resulting loss of tax revenue would be far greater than that raised by this tax,” the report noted.

Tim Knox, director of the Centre for Policy Studies, said that a mansion tax would “strike at the heart of aspiration” and of property ownership.

He said that closing the opportunities for Stamp Duty avoidance would be a sensible measure to reform the tax system but, for economic recovery, “it needs lower, simpler taxes aimed at encouraging, not penalising, wealth.”

Lucian Cook, Savills director of research, added: “A new annual levy such as proposed, with a fixed threshold, would really distort market dynamics and would penalise cash poor long-term owners of properties that have passed the threshold by dint of house price inflation.”

Analysis by Savills found that estimates of the level of Stamp Duty avoidance, primarily through off shore vehicles, are overstated.

It said that analysis of transactional activity suggests that Stamp Duty avoidance occurs in about 10% of prime central London and 4% in the rest of the UK. It said that tightening this loophole would generate around £150m.

There are 0 Comment(s)

You may also be interested in