Stamp duty: Buyers hate it – so why hasn’t it been scrapped already?
Academic Economists argued for years that Council tax and stamp tax were deeply flawed. In addition to politicians from every corner, various thoughts seem to have the same agreement. In 1976, Britain even had a royal commission that proposed radical reform, but it was never implemented.
However, it is said that the United Kingdom government is thinking of making a change in stamping to pay in houses selling more than £ more than £ only. This may be a great news, especially since it will be paid by sellers rather than buyers, especially as it is now. Due to higher housing prices, he would hit the most difficult people in London and Southeast.
Stamp Duty is one of the oldest taxes of England introduced in 1694, but its rules and rates have changed over time.
Particularly since 2010, rates have increased and a number of complex exemptions (for example for the first time for buyers), “holidays” and higher rates for the second houses came and went. Scotland and Wales now have their own systems.
These changes gradually increased cyclic fluctuations in housing markets. For example, when a reduced stamp tax rate (introduced in 2022) was gradually removed after three years, housing prices fell.
However, the main problem with stamp tax is home buying and selling tax – so to move. It is an obstacle for both the shrinkage and the growing family for the old ones. Therefore, it punishes Movements to use Britain’s scarce stock more efficiently.
In addition, it can serve as an obstacle to the labor market adjustment (and thus damaging productivity increase) by preventing people’s ability to act for better jobs. In 2017, a study concluded that two -percent stamp tax reduces mobility by 37 percent. However, this decrease in mobility seems mainly limited to short -distance movements.
Not having to pay stamp tax makes it difficult for people to find houses more suitable for their tastes. However, the lower effect on long -distance movements (typically associated with the labor market adjustment) does not provide much comfort.
The same 2017 study found that the treasury obtained from an increase of stamp tax, considering the additional costs and problems encountered in finding a suitable house for each £ 100, found that the households would need £ 84 to keep them at the same prosperity level.
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The stamp tax is a progressive tax – the more rich you are, the more you can pay, the more it is about the price of the house. However, if the house price is £ 125,000, the relationship is complex. This rises to 12 percent for the entire price of £ 1.5 million.
For the first time, more discounts for buyers and a premium for second home buyers. In fact, the regional differences in housing prices are much larger than the regional variation in income, the stamp tax is super progressive and punishes those living in London and southeast.
In September 2024, the median house price in London was £ 525,000 in the northeast in the cheapest region. However, the median gains of the Londonal gains in the northeast were only 1.4 times.
Why is the stamp tax still exist?
For governments, the attractive aspect of stamp tax is that it is cheap and easy to collect. And like any real estate tax, it is difficult to avoid. At the same time, there may be an easier tax imposing than the council tax. The reason for this is that it is prevented or volunteer.
If you don’t want to pay, you can’t buy a house. As a result, the buyer is responsible for paying. But of course, it may not be that simple. The tax burden will actually be divided between buyers and sellers – and everyone has to live somewhere, so rents will still reflect a stamp tax element paid by the landlords.
The reform stamp tax should be absolutely high on the agenda of a good government with a long -term view. However, a significant focus on stamp tax seems to be the result of the government’s income deficit crisis and the commitment of the Labor Party not to increase taxes on “working people ..
Most importantly, there is a proceedings for the stamp tax and the consuming tax completely for the reform of thought. A strategic vision will add our local government financing system to this agenda. Many of them think that the council tax is a much worse tax than stamp tax. This is the product of another crisis: in the early 1990s after the collapse of the politor government’s survey tax – something – something – the need to place.
Instead of addressing serious, long -term problems about how we taxed and finance ownership, it would be a tragedy to take a short -term change in a hurry to increase income in an emergency. If the stamp tax is changed, it should not endanger such a real, long -term and valuable reform.
Paul Cheshire is a professor of economic geography at the London School of Economics and Political Science
This article was initially published by the speech and re -published under the Creative Commons license. Read original article
