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1

Introduction

In 2014 the Labour Party revealed its plan to raise £1.2 billion for the NHS via a “Mansion Tax.” Under

the proposed tax an annual charge would be levied on all UK residential properties valued at over £2

million. This charge would come on top of already increasing taxes on family homes in the UK. It has

been proposed that the £2m property value threshold in 2016 will increase at the same rate as high-

value properties in the UK. However, this will not necessarily prevent additional family homes from being

dragged up into the “mansion” category.

Therefore, a tax which has been branded as impacting only the superrich, foreign property owners which

are looking to “park” their money in a safe haven investment, would in fact affect thousands of family

homes and place a burden on those with modest incomes. Additionally, the “slab” structure of the tax is

likely to create market distortions and contribute to falling prices at the prime end of the market.

Hence, in this report Cebr considers alternative revenue-raising measures to the Mansion Tax. A range of

areas that could be reformed to raise more revenue for the exchequer include: 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. Not only would reforms in these areas be more desirable than

a crude Mansion Tax (from an economic perspective), but they are also likely to be electorally popular

and there is scope to build a consensus around these measures as an alternative to Mansion Tax.

UK property taxation, as a share of total taxation, is higher than any other OECD nation, as Figure 1

below shows. As such, policymakers should be cautious in raising more taxes from this area. If the

political will to do so is strong, there are alternatives to Mansion Tax that should be considered, which

would have fewer negative effects. Indeed, the policies we have examined in this report could provide a

number of positive incentives, unlike the Mansion Tax:

Incentivising occupancy of empty homes

Incentivising property owners to contribute to the local community and economy

In addition, these policies combined would raise more tax revenue than the net gains from a Mansion

Tax (i.e. after adjusting for the significant loss of stamp duty revenue which Mansion Tax would

generate).

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