FT.com / UK / Politics & policy - Clegg proposes tax on homes worth over £1m.
The Lib Dems have proposed an additional tax on houses worth more than £1 million.
I agree such taxes have a logic to them.
But Clegg proves the #1 problem of them'- proving what a property is worth.
I really just can't see how this will work without enormous cost.
And isn't a top rate income tax without allowances fairer?
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This is indeed the problem with such a property tax. Revaluations for Council Tax have been continually put off because they always cause upsets. The solution is to tax the land value, which is much easier to assess. You need to value all the land and then undertake yearly revaluation, like they do in Denmark, Australia, etc. Houses worth £1m now: how are you going to identify them? Looking at only the top CT bands will not give an accurate picture and then what happens when we get the imminent house price dip followed by another splurge of inflation because nothing will be done to correct the dysfunctional land market from causing another boom/bust cycle in the future (18 years?).
Richard, what are you talking about, it’s difficult to prove what a property is worth? Any competent valuation surveyor can do it. The Valuation Office Agency does it regularly for the UBR. The Swedish valuation office has computerised the whole thing and have land value maps covering the whole country.
Now I agree it is difficult to achieve an absolute accuracy of better than 5%, but that is not a problem so long as all property is taxed at the same rate, as it is relativities that count. But if there are thresholds, as with the Council Tax and Cable’s daft proposal, then it becomes highly problematic and provides endless opportunities for disputes. And using selling prices as the basis of the assessment is also problematic because they are volatile, unlike rental values which are quite stable. Well conceived property taxes (not Cable’s) are the most efficient of all taxes, with less than 1% of the yield going in collection costs and no deadweight cost. I seem to recall that administration of the old rating system cost 0.5% of the yield.
The sort of people who pay top rate income tax can afford accountants to get them through the loopholes. Richard, you are devoting a considerable amount of your time and energy in exposing the way that wealthy people are exploiting loopholes to avoid paying tax. Cable’s proposal is a load of rubbish but since the principle of shifting taxation onto property (land) holdings provides the best chance of curbing the practices you so rightly deplore, why do you resist it?