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26

5

Conclusions

The research in this report shows that reforming the council tax system would boost tax receipts by £4.7

billion in 2015/16 and by a total of £25.6 billion by 2019/20. Additionally, it would shift a part of the tax

burden away from occupants of low value dwellings and towards those in prime properties. However, as

the average cost of moving up one value band is £350 per year, the reform is highly unlikely to create

distortions in the housing market. Also, given the council tax exemptions in place, those with low

incomes will mostly be shielded from higher payments.

Unlike the proposed mansion tax, a reformed system of council tax does not punitively over-tax a certain

group of home owners (those whose homes are valued above £2 million) or a particular region of the

country (95% of homes subject to mansion tax are in London and the South East).

In addition to being fairer and avoiding adverse effects on the number of transactions and house prices,

a reformed council tax system would also raise more revenue. While the Labour Party has estimated that

a mansion tax would raise £1.2 billion annually (an estimate which Cebr deemed overly optimistic in an

earlier report), council tax reform can raise nearly four times more. The added property tax receipts are

especially needed considering that the new stamp duty system introduced in December 2014 will reduce

revenue by an estimated £760 million in the first 12 months alone.

The substantial boost to the amount of revenue generated by the council tax system will justify and fund

regular property revaluations going forward. More frequent revaluations will prevent the regime from

again becoming outdated and ensure it maintains a link between tax payment amount and value of the

property for which the tax is levied.

Finally, it is alternatively possible to reform the council tax system as to eliminate payments for those in

Band A and reduce the burden on those in Bands B and C while charging occupiers of prime property a

higher annual fee. These measures would raise an additional £1.2 billion annually that can be spent on

the NHS. As an added benefit, many NHS nurses and employees would benefit from a reduced council

tax burden since those areas with the most workers in health and social services are also heavily

populated by Band A, B, and C properties.

© Centre for Economics and Business Research - Report Commissioned by Howard Cox for the FairHomeTax.UK Campaign