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26

10.4

Impact on other sources of revenue

In addition to the loss of stamp duty revenue discussed in section nine of the report, other sources of

revenue may be impacted as well. Although difficult to quantify, there may be a loss in revenues from

income tax collection as the mansion tax deters the migration of wealth into the UK overall, and London

in particular.

The migration of wealth into the UK may be additionally affected in lieu of the announcement that

overseas owners of second homes in the UK will be subject to a higher payment. The share of prime UK

properties currently owned by foreigners stands at around 50%. This segment of buyers will likely be

deterred from investing in the UK by the proposed scheme, but also by the signal which it sends-that

taxes levied on foreign citizens are to increase.

10.5

Weak link between wealth and value of owned property

All of the mansion tax proposals, both on the Lib Dem and Labour side, have envisioned and presented

mansion tax as a form of wealth taxation meant to reduce inequality. This is evidenced further by the use

of the word “mansion” in the policy name. At a September 22

nd

Labour party conference, when asked

about the notion of class envy that the phrase evokes, Ed Balls remarked that the phrase was coined by

the Liberal Democrats.

However, none of the proposed versions of the policy, including the most recent one, necessarily target

wealth. For example, a landlord that owns ten flats valued between £1m-£1.5m each would pay nothing

in mansion tax, while a homeowner in London that purchased his property decades ago for a modest

amount becomes subject to a minimum £3,000 per annum payment. As this example illustrates, the link

between wealth and value of owned property is not as direct as suggested by the proposed policy.

Hence, the mansion tax taxes the consumption of housing, more than wealth itself.

© Centre for Economics and Business Research