Why Stamp Duty should be scrapped
From a commercial property viewpoint an easing of credit and availability of finance for property lending will provide some real impetus to growth. My colleague Neil Slade talked about a shortage of new development where demand exists but credit is difficult and I thought it was worth supporting Neil’s piece with a little more detail.
A couple of years ago I wrote a Blog piece on why stamp duty is the ‘most obviously stupid tax’. At that time the Institute for Fiscal Studies had said the tax was inefficient and damaging, they advocated a reformed council tax based upon up to date property values.
We all now know the rating revaluation has been kicked down the road until 2017 and we have had further tweaks with stamp duty rates since 2011 which all indicates the coalition government has little appetite to look at tax on property during its current tenure in office. George Osborne is not adverse though in looking at altering tax rates on other stamp duties to make the economy more efficient – his recent budget abolished stamp duty for instance on ‘Growth’ shares predominately listed on the Alternative Investment Market (AIM).
It is possible to promote growth in the economy via changes to the stamp duty on property; just look at the incentives to companies locating in the designated enterprise zones.
The problem with current stamp duty rates are many and varied but one complaint would be the thresholds have never increased since Gordon Brown’s tenure at the Exchequer with sale price thresholds of £250,000 and £500,000 being the main mile posts. Why does stamp duty jump from 1% to 3% from £249,999 and £250,001?
Stamp duty as a transaction tax on property is a regressive tax that tends to ‘clog’ the market up. The tax which is levied on purchasers when they buy property impacts on our business lives as we trade property for clients and we have to be mindful and advise on the implications for stamp duty liability.
As I pointed out in 2011 the levels and differentials in stamp duty bands give added costs and proves a considerable factor in property decisions. I still think an abolition of stamp duty and a more locally enhanced tax based on rateable value is the way forward.
The furore over the delays to rateable value reassessment continues but I would hope that 2017 may be a good target to work for a major overhaul of how we tax on property in the UK.