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8

2

Raising funds through tax revenue

While much consensus exists around the claim that the NHS is in need of reform, the question of how to

raise the revenue necessary to fund these reforms is more controversial. An earlier Cebr report

published in November 2014 explained the substantial faults in the existing Mansion Tax proposal and

found that the measure was unlikely to raise its £1.2 billion revenue goal. A follow-up report in January

2015 found that a fairer system of council tax could raise up to £4.7 billion in 2015-16 alone. Yet as

reforming council tax is an unpopular measure, this report examines additional ways to raise the needed

funds. The presented options for raising tax revenue embody the principles responsible for Mansion

Tax’s mass popularity with the electorate e.g. imposing higher taxes on foreign buyers and relatively

wealthy individuals, but are likely to be less economically detrimental than Mansion Tax.

2.1

Implementing a different stamp duty system for foreign buyers

Unlike the Mansion Tax which applies a blanket charge on all properties worth over £2 million, thereby

imposing a burden on numerous cash poor residents of high value properties, a system of stamp duty

which charged higher rates on overseas purchases would target and tax wealth more precisely.

Additionally, charging higher stamp duty on foreign purchases is based on the premise that owners of

buildings have a social responsibility and this should be reflected in how the owners are taxed – those

who are not contributing to the community, such as the foreigners using a property as an investment

vehicle, should arguably incur higher rates of taxation.

Given that the UK, and London especially, is a global hub which draws much international talent across a

range of industries it is vital to design a policy that would target those foreigners using property for

investment purposes without discouraging non-UK nationals genuinely looking to settle in London.

Charging higher property taxes on all non-UK nationals runs the risk of seriously damaging the pool of

talent available for businesses to hire from. Therefore, the proposal outlined below only targets a

specific sub-segment of overseas purchases.

The proposed change to stamp duty would see higher rates charged on foreigners purchasing residential

properties. Foreigner status is based on residency, not nationality i.e. those that do not hold UK

citizenship, but are in the country on long term visas and enjoy residency status at the time of property

purchase would be subject to the same rate as domestic buyers. This distinction acknowledges the

difference between those using their UK property as an investment and those that have established their

home in the country and are hence contributing to the community in the same capacity as British citizens.

Table 1 shows the current stamp duty land tax (SDLT) rates which would continue to apply to all

domestic purchases. Table 2 shows the higher rates that foreign buyers would be subject to.

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