Think tank calls for Oz-inspired housing ‘sin taxes’

The UK Government should make better use of property taxes to deter foreign buyers, boost property supply and raise tax revenue, a thinktank claims.

In a report, funded by the Nuffield Foundation, the Social Market Foundation (SMF) has suggested that other English-speaking countries make far greater use of ‘housing sin taxes’ than the UK. Canada, Australia and New Zealand levy greater charges on foreign buyers and empty properties than the UK.

The SMF highlights that at present, the UK government applies a 2% surcharge on home purchases in England and Northern Ireland by individuals who do not have citizenship or residency. This is modest, compared with Australia, where combined excise taxes on non-residents approach 15% in some states, or Canada, where they can reach 25%. 

There are an estimated 1.5 million vacant dwellings in the UK at present. Depending on design of the levy, taxing these properties as little as 1% of their value could provide billions in revenue for the Treasury, the SMF said.

Both Australia and Canada tax their respective vacant homes as much as 3% depending on their location.

Australia and Canada also fully tax gains made from the sale of a property if it is sold within a year of the purchase, essentially denying sellers the benefit of capital gains tax exemptions. 

This tax is meant to discourage ‘house flipping’, and if the UK implements it – it would apply to 2.3% of home sales, the SMF suggested.

At current levels, a 50% tax on the profits from house flipping in the UK would raise £550 million per year.

Other recommendations from the report to increase access to homeownership include providing insurance for high loan-to-value mortgages, requiring banks to give mortgage applicants information on 10, 15, or 30 year fixed rate deals and abolishing Stamp Duty to allow homeowners to downsize and make up the revenue by decreasing capital gains tax exemptions for secondary properties. 

Gideon Salutin, senior researcher at the SMF, said: “One and a half million homes are left vacant in the UK, while two hundred thousand are owned by individuals who are not residents in the country. At a time when the country is desperate for homes and the government desperate for money, we should be using these as sources of revenue, rather than letting them sit idle. The billions in revenue these taxes could generate should be used to help those losing out in the housing market.”