The long-criticised UK’s Stamp Duty Land Tax, viewed as punitive for buyers with its cliff-edge structure, could be shaken up this week, according to Berenberg Bank chief economist Robert Wood.
The slab structure of the Stamp Duty tax means it is applied to the whole purchase price not just the portion which breaks the thresholds set by the government.
The Building Societies Association called for abolition of the structure last week.
Robin Fieth, chief executive of the BSA, said: “We have long been calling for the reform of Stamp Duty. Scotland has proved that structural change is possible and the Welsh Assembly may well follow suit with a target date of April 2018. It seems unfair that buyers see a difference of 200% and more in their tax bill for a very modest increase in purchase price.”
Wood said the government may also scrap Inheritance Tax and shore up lost revenues from the move through Capital Gains Tax.
But he cautioned: “We will have to wait for the statement to find out the actual measures of course. Still, the key point is highlighted by the inheritance tax idea: whatever Osborne gives, he will have to take away with the other hand.”
However, Stamp Duty created £9.3bn in revenue for the government from 2013-14, up from £6.9bn the previous tax year, making it an unlikely move for a government desperate to slash the deficit.
Other upcoming headlines from the Statement include a £15bn road building programme already announced by Prime Minister David Cameron, £2bn for the National Health Service and more funding for so-called ‘catapult’ innovation centres – they help commercialise innovations.
In his September party conference speech, Prime Minister Cameron also announced a £7bn income tax cut during the next parliament to be funded, presumably, by more spending restraint.
Rather than falling, the deficit has risen so far this year as income tax revenues are not rising as hoped due to wage restraint.
Wood said: “We expect the deficit to come in at a shade under £100bn this fiscal year, about £10bn higher than Osborne had expected.”
In 2010 the Chancellor projected austerity measures would be almost over by now, with borrowing down to under £40bn a year and the structural deficit all but eliminated, but it looks set to continue for most of the next Parliament.
“Something will have to give, meaning either higher taxes or less austerity over all during the next parliament,” said Wood.
However, he added: “With inflation now likely to remain lower for longer, we also changed our call for the first BoE rate hike to August 2015 (pushed back from June). More oil price falls, if sustained, could obviously push further in those directions.”