As you are probably aware some Lib Dem and Labour politicians have called for a Mansion Tax to be levied on expensive UK properties. No-one has offered any details on how such a tax would be implemented or indeed at what price level. However, the general consensus is that it would be levied on properties worth over £2m in line with the recent hike in Stamp Duty Land Tax at this level.
Of course the lack of detail highlights two things:
Firstly a tax on the rich is an easy sound bite for politicians. Obviously “the rich” (can anyone tell me what qualifies as rich nowadays?) are evil zombies who feast on the flesh of the poor and do absolutely nothing constructive with their lives, so they must be taxed until they can do harm no more…
Secondly, it is very hard to offer any detail, when one sits down to contemplate the potential ramifications – using the tax sledgehammer may cause more damage than good.
Now it is not often that I praise any politician, especially Labour ones – any politician who can support Ed Balls is clearly not fit for office – but credit where it is due. Three potential Labour candidates for the Mayor of London have expressed concerns about The Mansion Tax. The Guardian (no I can’t believe it either, but yes I am quoting The Guardian) reports:
Jowell suggested she favoured new council tax bands over a tax on the highest value properties:
I’ve thought a lot about the mansion tax dilemma and I represent a constituency where it would be an issue for some people…Not because they have a fabulous income and lots of disposable capital, but because they are people who bought homes maybe 20 or 30 years ago for a fraction of what they are worth now. They are people maybe becoming elderly who are asset-rich and income-poor. It’s fine to say we’ll impose a mansion tax, but for these people they would have to move out of their family homes. Let’s be wary of the perverse effects of that. What might be better as a solution is two or three more council tax bands … I think looking at the top end like that.
Jowell said she is “hugely bothered” by “residential deserts” in the centre of London, but the government should tread very carefully before introducing a formula to fix the problem. Asked the same question, Abbott said she thought it “feels like a tax on London”, while supporting the alternative idea of a levy on overseas buyers. Another hopeful, Tottenham MP David Lammy, said he agreed that a mansion tax is “clearly a tax on London”. He raised the case of retired lecturers who foster a lot of children in his constituency and are “not the sort of people who should be caught” by this.”
Now, our view has always been that a Mansion Tax would be an idiotic thing to introduce and for reasons that have not been touched upon above. Nevertheless one cannot underestimate what populist politicians will do – see Hollande in France. Nevertheless, it is promising that three prominent Labour figures have spoken out against it. Evidently they will try to increase council tax, but this should not be anywhere near as draconian and, to be honest, many of my clients are amazed by how little council tax actually is.
Of course this is by no means a definitive policy call, but it is a step in the right direction. However, I think the proposed introduction of Capital Gains Tax on international buyers is much more likely to become law. More may be revealed on 5th December and I will keep you updated.