A Savills director has written a report published by a free-market think-tank to claim that any case for a mansion tax is now redundant thanks to recent fiscal reforms.
The Shrinking Case for a Mansion Tax has been written by Lucian Cook, director of research at Savills, and has been published by the Centre for Policy Studies. The CPS was set up in the 1970s by Margaret Thatcher and Sir Keith Joseph, who became a cabinet minister in successive Thatcher governments.
Cook claims properties that would be targeted by a mansion tax have already been subjected to significant tax hikes since the policy was first mooted five years ago.
For example, recent Stamp Duty reforms introduced by Conservative chancellor George Osborne have increased the tax burden on high value properties by £1.1 billion, and the wealthiest 1.6 per cent of households now pay almost half of all stamp duty
The introduction of, and recently increased rate of, annual tax on so-called enveloped' dwellings has added at least another £100m a year to high value property tax, closing loopholes which existed when the mansion tax was first proposed, Cook claims.
He cites an example of how a house now being sold in south west London for £2.5m would have had its tax take increased by 405 per cent since 2009.
If in addition to these reforms, a mansion tax were introduced after the next election, it would add a layer of complexity and unfairness into the tax system for residential property says Cook, repeating a theme he has explored in some Savills research.
Although he admits that the economic impact of a mansion tax is impossible to quantify he insists it would clearly be damaging, not least in seriously undermining the attraction of the UK (and London in particular) to overseas investors.
Although the CPS says authors of its published reports are not necessarily representing the view of the organisation itself, this is not the first time that Cook has locked horns with the Labour Party over mansion tax.
Late last year shadow chancellor Ed Balls made a reference on The Andrew Marr Show on BBC One to Savills scaring everybody about the effects of the mansion tax. Savills had claimed shortly before that the threat [of mansion tax] has already slowed the market.
Cook was Savills' spokesman to respond to the shadow chancellor at the time, saying: We would favour a revision of the council tax system. This would be more equitable, without the potential unintended consequence of punishing owners of lower value homes, or those who are equity rich but cash poor.
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Comments
OK, though 820 sq ft is not particularly 'big,' and certainly not a mansion. Who's to say anyway that they have 'money going spare' Most of these people will have stretched themselves to their absolute maximum to be able to afford mortgages on these houses; note the cars on the streets of those houses - hardly flashing the cash. Main point anyway is not the cash poor argument, rather the fact that it is unjust to charge someone a tax on living, especially when these people have paid a huge amount of tax already in income tax etcetc
Oh come on - property doesn't go from average priced to above 2m, even in a 30 year span. It's more than likely that the area they would have bought in would have been fairly affluent if it had the potential to go up to being worth more than 2m. Even in areas that have experienced significant regeneration and gentrification, the jump wouldn't have been that sharp.
As for your second question, here you go. In Kilburn, commonly regarded as quite a wealthy, well-to-do area, [url="http://www.rightmove.co.uk/property-for-sale/property-48344443.html"]you can get this 3 bedroom terraced house for under 1m[/url]. Big, spacious, with a garden and two en suites - all looks very nice. Comfortably under the 2m cap. And there are plenty of other examples, even in the 1-2m bracket. If you have the funds, you can still get a lot for your money and not be punished by the mansion tax.
Even this one, a 5 bedroom house in a very upmarket part of London, is below the 2m cap.
http://www.rightmove.co.uk/property-for-sale/property-47051099.html
Myleene Klass was spectacularly wrong on this point - it's not poor little grannies who would be affected by this tax, because you would have to have a lot of disposable income to afford the places above 2m.
In reply to Daniel Roder; Equity rich but cash poor - I am not sure what you don't understand about this phrase. Elderly people can have lived in their homes for some 30+ years, and at that point they would have paid an average amount for them. Certain properties then increased in amount at a far steeper rate than others, which is not the fault of the occupant. Said occupant can be living on a meager pension - i.e. cash poor, they will already be having to pay a huge amount for keeping the property running as it is. How can you therefore say that 'surely [they've] got a lot of money going spare' and that it 'can't be possible,' do you know any of these people I am glad that you admit that you see the unfairness to some extent, but it is your last paragraph that shows your utter cluelessness; 'Even in London, you can get a big house in a nice area for under 1m. These 2m plus properties only cater to the super-rich and should be taxed accordingly.' Please show me these 'big' houses in 'nice' areas because I am sure a lot of people would love to know. Thank you Guest (Neil Wraith) though for the very interesting article
Equity rich but cash poor I've never understood this statement in relation to the mansion tax. If you've got a house worth 2m or above, surely you've got a lot of money going spare Houses worth that much aren't ten a penny like Savills will have you believe. They are for the super-rich. Even someone on an above average salary wouldn't be looking at a property of that price - it's out of the reach of the many.
I understand some of the other arguments about it being unfair - why should someone with a 2m house pay the same tax as someone with a house worth 100m But let's not pretend that someone who owns a 2m home is cash poor - that just can't be possible. Even in London, you can get a big house in a nice area for under 1m. These 2m plus properties only cater to the super-rich and should be taxed accordingly.
Savills not looking out for their own self-interest or anything. No, no, no, they really feel strongly about this. Honest.
You again WE HEARD YOU THE FIRST 500 TIMES.
I admire your dedication in heading to every article mentioning mansion tax and copy and pasting this over-long, garbled rant. And not just on this website either, I've seen this exact same post on other sites, too. Enough already!
WHY LABOURS MANSION TAX IS ONE OF THE WORST IDEAS IN POLITICAL HISTORY:
1) ITS AN ECONOMIC FALLACY:
(a) Labour claims its Mansion Tax (MT) will raise 1.2b for the NHS. It wont. And heres why:
(i) 1.2b is the estimated GROSS REVENUE (the total revenue that is raised before associated costs and losses are deducted). The NET PROFIT (the actual sum of money that will be raised for the Treasury) will be very considerably less; and is calculated by deducting from the GROSS REVENUE both the administrative costs of operating MT and all consequential revenue losses; which includes (but is not limited to) significant leakage of STAMP DUTY, CAPITAL GAINS TAX, INHERITANCE TAX and INCOME TAX. Hence, even IF 1.2b GROSS REVENUE were to be raised by MT (which is not going to happen), the NET PROFIT (and hence the actual sum of additional money that will be available to be injected into the NHS) will be a mere fraction of this.
(ii) Substantially LESS than 1.2b GROSS REVENUE will in fact be raised. Labour have erroneously done their economic calculations as if MT will be operating within a vacuum; and in doing so have failed to take into account any and all causality effects that will transpire as a result of MT being brought into existence. Such as, for example, the fact that, for many reasons, the number of 2m+ homes will significantly drop.
(b) The NET PROFIT that MT will actually raise won't make ANY significant difference to the NHS whatsoever. Itll be wholly insufficient because the annual NHS bill = 95b, and its shortfall = 30b.
(c) A recent independent economic study by the Centre for Economics and Business Research (CEBR) has revealed fatal flaws in Labours Mansion Tax. The damning report shows that Labours Mansion Tax will cause a 2 billion slump in Stamp Duty. Furthermore, it confirms that the new tax will not raise the planned 1.2 billion for the NHS. The consequential drop in Stamp Duty alone, the report
says, will likely be even greater than the proceeds of the new mansion tax
rendering it pointless. Mr Cox, who commissioned the CEBR study, said: This
report shows that Labour [have] got their sums wrong and suggests their
calculations were written on the back of an envelope and not properly thought
through.
(d) STAMP DUTYS recent comprehensive updating as part of the Chancellor George Osbornes Autumn Statement, has rendered Labours Mansion Tax redundant. Property expert Alistair Bingle, has said that it "takes away the need for the much maligned Mansion Tax". And yet, Labour are planning to push ahead with its plan for their Mansion Tax IN ADDITION to the considerable increase in STAMP DUTY with respect to properties valued at more than 937,500.
2) ITS MISTARGETED & UNFAIR:
a) 96% of homes affected are in London & SE;
b) Most not mansions but flats (38%) or terraced houses (46%);
c) Most people affected have already paid up to 70% total in taxes already as INCOME TAX, STAMP DUTY, IHT, VAT & CGT;
d) Many are cash-poor. Labours proposed deferral equates to additional STAMP DUTY and/or IHT, which are already highly taxed;
e) CEBR economists have warned that Labours proposed MT deferral will without a shadow of a doubt backfire, because people will simply never sell their homes as a result, blocking the property market and leaving the debts to mount up; and many homes would, as a result, will become unsellable because they would have to pay so much back-dated mansion tax;
f) Mortgages arent allowed for and tax threshold is 42K+ gross household income, so middle-income families with mortgages will be affected, who already have to work hard to be able to pay their bills, and wont be able to afford to pay the tax;
g) The tax penalizes families comprising 3+ generations who have chosen to live all under one roof to save costs;
h) MT taxes only property, not ALL assets, so the super-rich with millions in other assets get off scot-free. MT fails to ensure all the super-rich pay their fair share; some will pay nothing, while others have to pay more than appropriate. For example, with MT someone who owns a singular property worth 2m with a 700,000 mortgage and hence net wealth of 1.3 million will have to pay, but a guy who owns 400 million of assets including private jets, helicopters, luxury sports cars and expensive artwork, and lives in a gigantic castle in Scotland worth 1.8 million would not have to pay a penny. How in what universe is that fair!
3) ITS NOT JUST THE SUPER-RICH WHO WILL BE AFFECTED:
a) A significant number of the super-rich will move their businesses, their wealth and likely themselves too out of the UK, then the UKs economy will weaken and average person suffer as a direct result. The top 1% of the UK's population are responsible for circa 30% of the UK's total tax revenue. The elite class (= top 6%) are responsible for even more than this. Should they choose to move their businesses, their wealth and themselves out of the UK, this would directly cause a drop in tax revenue for the Treasury of UP TO 30%;
b) IHT when introduced was to be paid ONLY by the super-rich but now middle-class families have to pay it. The same will happen with Mansion Tax. Its just a matter of time. UPDATE: The recent independent economic study by CEBR has revealed that the MTs net WILL widen over time to include more and more homes, with 2,000 additional homes becoming affected by the tax within the first 36 months alone.
4) CHARITIES WILL BE HIT:
Lord Winston (Labour peer), who devotes a lot of his time to raising money for charities, has said about the Mansion Tax: It makes it extremely difficult to raise charitable donations. Because [those liable to pay the mansion tax] will start refusing one of the most important areas of [charity] giving, legacy gifts That will affect charities like Cancer Research UK, which relies on legacy gifts, which are in fact its primary source of income. (N.B. A legacy gift is a sum of money that is donated to a charity in a persons will, and hence paid to the charity upon their death).
With the Mansion Tax, with respect to individuals who are cash-poor /
asset-rich, instead of EXEMPTIONS (which is what is appropriate and much needed) there will only be DEFERRALS of payments, which will accrue and be paid as a lump sum as and when the property owner dies and/or the property is sold. And therein lies the problem the Mansion Tax, being a government tax, will automatically take legal precedence over any such legacy gifts, even when still included in someones will. In other words, in the legal pecking order for receipt of
funds the Mansion Tax will rank higher than charities, and hence monies that would
otherwise be paid to charities will end up being used to pay the Mansion Tax
bill instead.
5) IT WILL FORCE THE CLOSURE OF HISTORIC HOUSES:
The Historic Houses Association (HHA) has warned. MT will affect 1,590 mansions and castles that are a source of tourism and tourist-related income for the UK. These should be exempt but, as is, they wont be. Its a lose-lose, because if Labour makes them exempt then a big chunk of the 1.2b gross annual revenue that is claimed MT will raise will be lost, in addition to the items listed in (1) above. HHA also said the tax would push owners towards financial ruin. But there is a lot
more to it than that The houses have a big impact in their area because they
provide employment. And such employment would cease, with THOUSANDS of
individuals set to lose their jobs as a result. And then theres the local villages and the people living there, who thrive on the business they attain on the back of the tourists who visit and the marketing done by these open mansion houses and castles. Local hotels, B&Bs, restaurants and the like for example. They will be hit hard too.
The crux of the problems with the Mansion Tax is that there are too many flaws
and problems, too many of the rich get off scot-free, and too little revenue will be raised to make it worthwhile.
Labours Mansion Tax wins the award for the worst tax idea ever, in that it has
the most things wrong with it whilst at the same time raising comparatively an
insignificant amount of money for the Treasury. The bitter irony here is that the pathetic sum that Labours Mansion Tax will actually raise, which in reality will only be a few hundred million pounds net profit, won't make ANY significant difference to the NHS whatsoever.