Research shows potential for stamp duty cuts
Published by Max Salsbury for 24dash.com in Housing
First-time buyer mortgages rocket in March
Stamp duty could be simplified and cut without significantly impacting on the Treasury's revenue, a new report claims.
The London School of Economics' research reveals that cutting stamp duty significantly increases the number of housing transactions - and analysis from Walbrook Economics shows how an increase in transactions would mean new tax receipts and mitigate the cost of a cut.
The research found that:
• Stamp duty land tax raised £6.1 billion in 2011/12 with residential property accounting for £4.2bn of that total, representing 0.8% of the £549bn of taxes raised that year.
• Walbrook Economics estimates around 1.1 million jobs are dependent directly and indirectly on the housing market. The fall in housing activity has cost 80,000 construction jobs and 80,000 to 100,000 associated positions in other trades.
• Walbrook also estimates that the decline in transaction volumes has cost the Treasury in excess of £1.3bn p.a. in lost income tax and national insurance.
• Stamp duty accounts for less than 30% of the total tax receipts associated with housing transactions overall.
The Tax Payers’ Alliance (TPA) believes that stamp duty is an unfair double tax and should eventually be abolished.
According to the TPA, it stops young people buying a home and starting a family; discourages elderly people from downsizing and makes it harder for people to move to new places for new jobs.
The TPA recently launched its 'Stamp Out Stamp Duty' campaign, which outlines three proposals it believes will simplify stamp duty and reduce the burden on home-buyers:
• Proposal 1 - Move to a marginal tax. If people only paid each rate on the value above its threshold, rather than paying the highest rate for which their property is liable on the entire value, that would be a substantial tax cut and remove those anomalies. This proposal would particularly benefit those at the middle to low end of the market.
• Proposal 2 - Double the thresholds. Stamp duty currently has five rates, between 1% and 7%. If the thresholds were doubled, 77% of all transactions in 2011/12 would have been exempt from any stamp duty. This proposal would also particularly benefit those at the middle to low end of the market.
• Proposal 3 - Halve the rates. Halving stamp duty rates would send a clear signal to householders that the government was determined to encourage home ownership and mobility, and would benefit all home-buyers.
Matthew Sinclair, TPA's chief executive, said: "Stamp Duty is an unfair double tax that stops young people buying a home and starting a family, discourages elderly people from downsizing and makes it harder to move to new places for new jobs.
"The government could cut Stamp Duty with a limited impact on the amount of money going into the Treasury’s coffers, as lower taxes would encourage more people to move and therefore increase the number of transactions being taxed. Politicians should seize this golden opportunity to reduce the burden and make things easier for the hundreds of thousands of people looking to buy or sell a home each year."