Monday 28 March 2011

Reading The Entrails

In his Budget speech, little George Osborne muttered something about 'making owners of high value properties pay their fair share of taxes' (why he refers to 'residential land and buildings' as 'property' is a mystery to me).

At a mundane level, what I think he means is doing something about Stamp Duty Land Tax avoidance schemes using limited companies, or possibly he was referring to the fact he's increased the annual non-dom levy from £30,000 to £50,000* for people who have been here for more than twelve years.

On a more optimistic level, perhaps Uncle Vince is right (and he ought to know, seeing as he can just ask at the next Cabinet meeting) and little George is thinking about something like a Mansion Tax.

* What is entirely bizarre is that people in this country have no respect for real wealth, it is only 'land ownership' (which is not real wealth at all) which confers some sort of exalted status. Don't forget that the non-dom levy was originally a Tory idea a few years ago, which Labour enacted. I don't see the Faux Libertarians out on the streets comparing this to the Window Tax.

So if wealthy non-dom's are asked to pay £30,000 or £50,000 a year EACH for the privilege of living in the UK, that's fair game. But if instead they were asked to pay 0.5% of the value of their homes above a very high threshold of £1m or £2m (i.e. a levy for the privilege of living in a certain part of London or Poole, Dorset) that would be seen as an attack on 'wealth' or something.

PS, the number and type of people paying the non-dom levy and the amount of money it raises would be broadly similar to the amount raised from the Mansion Tax.

17 comments:

DNAse said...

Around my way the occupant of a studio flat pays about 1% of its value p/a in council tax. However the occupant of a £1M house (it wouldn't be a mansion) pays only about 0.3% of the property value p/a.
So even with a 0.5% levy on the million pound properties the studio flat dweller is hit proportionately harder. Surely a case for a simple flat rate percentage replacement for council tax rather than adding levies at spurious points?

Mark Wadsworth said...

DNAse, exactly. Which is why the Northern Ireland way of doing things (flat 0.7% on total value of each home) is a much better than Council Tax (although it comes to much the same thing in £-s-d).

The NI model just needs tweaking:

a) Upper capital value limit of £400,000 to be abolished.
b) All other taxes on residential land and buildings to be abolished (SDLT, IHT, TV licence etc).
c) The 0.7% rate to be adjusted upwards accordingly to about 1%.
d) From here on in we are really motoring. Next scrap VAT and hike the rate to 3%, then scrap Employer's NIC and hike the rate to 5%.
e) Then replace existing income/corporation tax with flat 30% rate; then reduce this to 20% and hike Dom Rates to 6%; then reduce flat tax to 20% and hike Dom Rates to 7%, then abolish flat tax rate to 0% and hike Dom Rates to 8%.
f) Sorted.

Scott Wright said...

"PS, the number and type of people paying the non-dom levy and the amount of money it raises would be broadly similar to the amount raised from the Mansion Tax."

I'm going to extend on this one for you.

The difference being that a non-dom can choose to leave if the tax advantage is destroyed through the annual levy, someone has to own the mansion.

Mark Wadsworth said...

SW, indeed, the same goes for the 50p rate, people can avoid, evade or go offshore, so that's argument in favour of LVT #4,265.

Scott Wright said...

"The NI model just needs tweaking:

a) Upper capital value limit of £400,000 to be abolished.
b) All other taxes on residential land and buildings to be abolished (SDLT, IHT, TV licence etc).
c) The 0.7% rate to be adjusted upwards accordingly to about 1%.
d) From here on in we are really motoring. Next scrap VAT and hike the rate to 3%, then scrap Employer's NIC and hike the rate to 5%.
e) Then replace existing income/corporation tax with flat 30% rate; then reduce this to 20% and hike Dom Rates to 6%; then reduce flat tax to 20% and hike Dom Rates to 7%, then abolish flat tax rate to 0% and hike Dom Rates to 8%.
f) Sorted."


Actually, due to the politically unacceptable nature of hiking tax rates, flat 30% c/tax & i/tax probably wouldn't fly after Georgie boys reduction of c/tax. Jumping from no VAT and 3% directly to 20% flat taxes and 6% is probably the best way forward.

Span Ows said...

A bit off topic but I think they need to start collecting all tax for a START. I'm led to believe that the amount of UNCOLLECTED tax is in the tens of billions (I don't mean evasion or avoidance)

Old BE said...

Surely land is about as "real" as it gets. Or are you suggesting that stocks/shares/cash money have more inherent value?

Mark Wadsworth said...

SW, yes, your plan is even better.

SO, possibly, which is argument #4,266 for LVT. The collection rates for Council Tax and Business Rates are something like 98%.

BE, land is real but land values aren't. The value of farm land goes up by a factor of 100 if it gets planning.

And for politicial/economic purposes, it's the income from land that matters far more than the land itself, i.e. what happens if taxes on incomes were scrapped and in favour of LVT?

Bayard said...

"he's increased the annual non-dom levy from £30,000 to £50,000* for people who have been here for more than twelve years."

If they are non-doms, should that be "who haven't been here for more than twelve years".

Mark Wadsworth said...

B, nope, it applies to non-doms who HAVE been here for more than 12 years. You can be born here and have a UK passport and never even leave the country, but still be a non-dom.

Scott Wright said...

"B, nope, it applies to non-doms who HAVE been here for more than 12 years. You can be born here and have a UK passport and never even leave the country, but still be a non-dom."

Wasn't that politician guy one by virtue of something his father did. (I know how very specific I am being here....)

Bayard said...

Mark, so how does one become a non-dom then? Is it an expensive process, or can anyone do it?

If they are a non-dom, then officially they aren't here, even though they are, if you see what I mean.

Mark Wadsworth said...

B, it's not 'long and complicated' it is 'impossible' (see what SW says).

Bayard said...

Well, it must be possible, or there wouldn't be any, or are non-doms a dwindling breed, like hereditary peers?

Mark Wadsworth said...

B, yes, you have to be born abroad with a foreign Dad, or at least born in the UK with non-domiciled/foreign parents.

Look, it's all very tricky and boring and if you have UK parents and were born here and still live here, there is no earthly way of becoming non-dom, even if you cut all ties with the UK and lived abroad for the rest of your life.

Bayard said...

Just like being a hereditary peer, in fact, but with more tax advantages.

James Higham said...

The Green Investment Bank is another good one.