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Think Tank proposes new tax based on value of property among a package of measures aimed at stemming Britain’s growing wealth inequalityA radical plan to scrap council tax and stamp duty in favour of a new levy based on the value of people’s homes is being urged by the IPPR think tank, as part of a five-point programme to overhaul taxation of wealth.Under the plan, all homeowners would pay annual property taxes proportionate to the present-day market price of their homes.
If the new property tax were set at 0.5 per cent it would raise at least as much as current council taxes; a higher rate would be needed in order to replace the revenue currently raised from stamp duty land tax, paid by anyone buying a home.
The report says the change, alongside other measures to change the way wealth is taxed, would help to tackle growing inequality in wealth within the UK.At present wealth is twice as unequally distributed as income, with the top 10 per cent of households owning 44 per cent of wealth while the bottom 50 per cent own just 9 per cent.
It also calls for the abolition of non-domiciled status, used by some UK residents to avoid paying tax, and for making trusts more transparent. This would include a public register of beneficial ownership for in-possession trusts, and measures to prevent the emergence of “ownerless assets” that can also be used to avoid tax.
The IPPR discussion paper is the last of a series developed for the Commission on Economic Justice, whose final report was published last month. Recommendations adopted by the Commission were:
The new property tax would be levied on landlords, and thus not directly on tenants. A homeowner with a high-value property but low income could defer payment until their property is either sold, or left on death as part of their estate.
The report proposes allowing some local discretion to vary the new tax, to allow for different priorities and public service needs. It also suggests variable tax-free allowances to offset regional disparities in house prices.
Rising home ownership once helped to reduce wealth inequality, but rising prices and rents alongside falling home ownership are now exacerbating it. Property owners have seen their wealth and income grow, while increasing numbers are locked out of home ownership and must pay increasingly high rents.
Since 1997, average house prices have increased four times faster than average full-time earnings.The report argues that a property tax would capture some of these financial gains, while also dampening future house price inflation.Currently, the report argues, housing is undertaxed relative to other assets, distorting investment behaviour and contributing to growing wealth inequality between homeowners and non-homeowners.
Carys Roberts, Senior Economist at IPPR and a co-author of the report said:
“The UK is a wealthy nation but that wealth is very unevenly distributed, which has negative implications for both economic prosperity and justice. The UK’s current system of wealth taxation not only fails to tackle these issues, but it often makes them worse by creating opportunities for avoidance, distorting investment decisions, poorly capturing wealth transfers and under-taxing income from assets, particularly housing.
“Taken together, the changes we propose would transform the tax treatment of wealth in the UK and make the economy more efficient. They would increase tax revenues, reduce wealth inequality and promote both prosperity and justice – an outcome that is in everybody’s interest. Political parties across the spectrum are now promising to end austerity: wealth taxes must be high on the agenda.”On the proposed new property tax, she added:
“Council tax is a regressive tax as it falls disproportionately on those with lower incomes and wealth. It’s also outdated, as it’s based on valuations that have not been updated since 1992. A new property tax would be far more progressive, and would effectively capture increases in house prices in a way that the current system does not.
“A tax of 0.5 per cent could raise up to £1.6 billion more than the council tax at a UK level. Yet the vast majority of households would benefit from the tax change and estimates suggest that for those in the bottom half of income distribution, disposable incomes would rise.”SEE ALSO - 7 ways first time landlords can mitigate riskUP NEXT - Are we seeing the slow decline of the sector? DON'T MISS - At last! A tax break for Landlords?NOW WATCH:
Vanessa Warwick Landlord and Co-Founder of PropertyTribes.com **If you have got value from Property Tribes, find out how you can support it in remaining a free to use community resource**
Let’s all clear off now before working hard is a waste of time.
Well said Steve. I wasjust about to post
‘Christ - think suicide might be a better option - but they’ll probably tax that’
but your post sums it up without my hysteria added.
Landlord additional cost of Section 24,plus pay to empty the tenants bins and other services.
No scraps left !
Rents will soar, oh no they wont coz we will cap it.
We are Doomed
We have seen nothing yet
it’s going to be worse for coming generations
we have seen the best
Learn Change and Adapt ?????
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I thought Council Tax and the old Domestic Rates were local taxes collected by local authorities to fund local services and amenities such as schools, libraries, highways, street lights, road-sweepers, rubbish collection and a load of other stuff which benefits pretty-much everyone who walks out of their front door.So, how much more unfair [than the current system] would this new crap be on the old widow who doesn't get out much, hence she's not actually getting much out of these services, yet she happens to be living in a valuable house but she's only scraping by on her widows pension?Council Tax will already be costing her double the amount being paid by a family of 4 adults living in a cheaper house a few streets away - so isn't that enough for her to be doing her bit for society (which is what her and her late husband had been doing through the war and throughout their working lives).
Think Tank kiss my arse!!!
TBF a property tax in your example would be levied on the Estate after widow's demise - but be an admin nightmare as means testing would be involved - unlike CT...
Thanks for clarifying.
They're still nothing but a bunch of think-tankers! (Rymes with)
I also disagree that CT is regressive - as those on benefits pay less than 30% of CT - depending on the individual LA.
When did I live in RUSSIA
the worry is someone is thinking like this
what did I say this morning the government will tax ambition and dreams I’m not far wrong
Interesting how wealth distribution issues like the panama papers are conspicuous by their absence isnt it.
This is nothing to do with redressing any kind of inequality, its about being seen to be doing something about it in order to cling to power whilst throwing us under the bus.