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4

Executive Summary

The report offers various alternatives to the Labour Party’s proposed Mansion Tax. The options

presented carry the same sentiment of wanting to introduce higher taxes on wealth, but are more

economically desirable and avoid some of Mansion Tax’s greatest shortfalls such as placing a burden on

cash-poor, asset-rich individuals many of which are pensioners. The proposed policies also have a range

of positive incentives, such as encouraging occupation of empty homes. The proposed alternatives focus

on reforms in the following areas: taxation of empty properties, imposing higher levels of stamp duty on

overseas property purchases, and limiting tax breaks currently granted to buy-to-let landlords.

Charging foreign buyers a higher rate of stamp duty would increase tax revenues by £491 million in

2015-16 and by a total of £3.3 billion by 2019-20.

By applying the higher rates only to non-UK residents

and not to all non-UK nationals, the policy will not deter those foreign buyers that wish to set up a home

in the country and contribute to the society.

Allowing councils to charge a 100% council tax premium on properties that have been vacant for

longer than six months would generate an additional £322 million in 2015-16 revenue.

Additionally, it

would help tackle the issues associated with absentee ownership such as social deterioration.

While 95% of homes that would be subject to the Mansion Tax are in London and the South East,

charging a council tax premium on empty homes would draw receipts fairly from all British regions.

In

fact, no single region would account for more than 21% of the receipts.

Buy-to-let landlords receive tax relief which runs into the billions of pounds.

While abolishing all of the

tax reliefs would have a range of negative consequences, there is certainly scope to limit some overly

generous reliefs such as the wear & tear allowance.

We estimate that aligning landlord repair & maintenance tax relief closer to actual and cost-effective

repair expenditure could save the government £285 million in 2015-16 alone.

By 2019-20 the gains

would accumulate to £1.5 billion.

Reforming the taxation of empty properties, imposing higher levels of stamp duty on overseas

property purchases, and limiting the wear & tear allowance available to buy-to-let landlords, would

raise more than the proposed Mansion Tax, but without all of the unintended consequences.

The gains

from the reforms outlined in this report are expected to reach roughly £6.2 billion by 2020. The Labour

Party has estimated that the Mansion Tax would raise £1.2 billion annually. However, a previous Cebr

report found that the loss in stamp duty revenue resulting from lower house prices would reduce the

overall gains in the years to 2020 to £4 billion.

Reform

Added revenue

2015/16-2019/20

Taxing empty homes

1,342,781,000

Higher SDLT for foreigners

3,340,151,000

Buy-to-let changes

1,499,289,000

Total

6,182,221,000

© Centre for Economics and Business Research for the FairHomeTax Campaign Feb 2015 commissioned by Howard Cox