UK has highest property taxes in the developed world, report reveals
Property taxes in the UK are the highest in the whole of the developed world and the system needs to be overhauled, it is claimed.
A new report from think tank the Policy Exchange which examines the pros and cons of introducing new land and property taxes, also says that 1.5 million new homes need to be built by 2020 to make it easier for people to buyer their own house.
Council tax bills, stamp duty, inheritance tax and capital gains tax have contributed to a situation where UK property taxation raises more than twice the average level in other developed countries. The report says that Britons pay around £60 billion.
The taxes are worth 4.1% of Britain’s economic output, compared to an average of 1.8% in other Organisation for Economic Development (OECD) countries. In Germany, for example, it is only 0.9%.
‘No other developed country taxes property more heavily than the UK. Yet rising house prices and falling levels of home ownership have led to many calling for an increase to land and property taxes. But these issues will only be solved by genuine reform of the outdated planning system, not a tax raid on people’s homes,’ said Alex Morton from the Policy Exchange.
The report criticises some proposals that have been put forward recently, for example a ‘mansion tax’ on properties worth more than £2 million. It says this kind of tax would penalise those who live in small but valuable homes and some people required to pay would not have an income that in any way relates to the value of their property and capacity to pay the tax.
The report argues that there is a strong case to cut back stamp duty to a low and reasonably small tax. Stamp duty has been repeatedly increased by governments since 1997. Stamp duty used to be charged at 1% on all homes bought for more than £60,000. Today it is levied at five different rates of up to 7%.
Instead of altering taxation levels, the report says that the best way of bringing down the cost of rents and home ownership, and dealing with issues such as house price volatility and the wider instability this creates are changes to the planning system.
It calls on all policymakers to commit themselves to building 300,000 new homes every year from 2015 to 2020 by building garden cities and boosting the self build market, something the current government is already committed to doing.