Friday, July 22, 2011

House prices would be hit by 'revolutionary' property tax proposed by OECD

Cash-strapped governments have long wanted to grab a bigger share of the wealth we hold in housing, now the Organisation for Economic Co-operation and Development (OECD) says Britain should adopt a Continental European-style property tax.

Pier Carlo Padoan, chief economist of the OECD, says George’s Osborne’s cuts are “appropriate,” but the Chancellor must do much more to stimulate Britain’s economy. Mr Padoan argues he should scrap many VAT exemptions – including food, passenger transport and domestic fuel – and abolish council tax and stamp duty in favour of “a property tax based on market values.”

Leading accountants described the proposals, to be set out in the August edition of Prospect magazine, as “revolutionary” and predicted they would hit house prices and prove extremely unpopular. Pensioners and even tenants would suffer higher costs under a property tax, accountants predict.

Instead of HM Revenue & Customs taxing property via stamp duty land tax (SDLT); inheritance tax (IHT); and – in the case of second homes – capital gains tax (CGT); annual liabilities would be calculated, based on estimations of house prices. But Mr Padoan argues that his reforms would “dampen fluctuations in house prices” and are essential to put the British economy on a more stable long-term footing. (more)