As the FT noted yesterday:
The number of UK house and flat sales plummeted last month after buyers accelerated their purchases in June to beat an expiring stamp duty holiday, official tax data showed.
To be precise, there were 73,740 residential property sales in July compared to 198,400 in June, and an average of 145,000 in the first six months of the year and an average of about 100,000 a month from 2012 to 2019.
What does this say? Two things, I suggest. One is that Covid has made people want to move. That is obviously a factor in this data.
The other is that tax has a massive influence on market behaviour. The stamp duty holiday that Rishi Sunak introduced last year had the deliberate intention of both boosting house prices, which keeps Tories happy when all else around them is failing, and boosting the economy, which house moves do as people seek to decorate their new homes.
Why does this matter to me? There are two reasons. The first is that, as I argued in my book The Joy of Tax (available still from all good booksellers, and some others), tax usbthe single most powerful instrument available to a government to shape the society that we live in, for better or worse. I would argue in this case that the use of tax has been for the worse: the boost to the real economy from all this activity has been limited if recovery data is anything to go by, but very large numbers of young people are now even more distant from the prospect of buying a house than they were before this hapless exercise in using the tax system to subsides private wealth took place.
Second though, what this evidences is that behaviour is heavily influenced by tax. This matters, and proves my theory in The Joy of Tax. Use this power for the right reasons, as I argue could be done to redirect savings in ISAs and pensions to fund the Green New Deal, and soon thing very powerful for society could happen as a result.
I will continue to live in hope that parties on the left will realise that this is possible, just as parties on the right do now, but in their case to increase the divisions within society.
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“The other is that tax has a massive influence on market behaviour.”
“behaviour is heavily influenced by tax.”
I thought you said in the past that tax doesn’t change people’s behaviour? You’ve said that people don’t move because of tax changes. When ever people have criticised suggested tax rises because it would lead to people leaving or changing their behaviour you’ve said it doesn’t. Now you’re saying they move because of tax changes.
When did you change your mind?
They don’t move across borders because of tax
They do move their houses (but usually not far) and their savings
Very different things
But you chose to miss the point as trolls always do because you live in evidence free worlds
“They don’t move across borders because of tax” “evidence free worlds”
Phil Collins, Jenson Button, Lewis Hamilton, Philip Green, Richard Branson, just to name a few celebrities. Many others who are not celebrities. The Channel Islands and IOM are stuffed with them. Someone like Hamilton earning £50m a year leaves and it requires over 4,000 UK citizens on average wages to make up the tax shortfall.
Facebook co-founder Eduardo Saverin moved to Singapore and renounced US citizenship to save himself billions in tax.
But your response will be the same it always is. You say people don’t leave the country because of tax, contributors on here provide lists of names of people who have and you retort that these people ‘don’t count’ or that the UK is ‘better off without them’. Maybe they don’t and maybe we are. But they left because of tax and we get £0 tax out of them and that proves, with evidence, that you are wrong.
This is so boring
So, a tiny number of sad people become tax exiles – which is incredibly hard to do
Whoopee
The evidence is the vast majority don’t and would never want to
But you want the exceptions to prove a rule
They don’t
Jake Remain said in response to Richard:
“Phil Collins, Jenson Button, Lewis Hamilton, Philip Green, Richard Branson, just to name a few celebrities. Many others who are not celebrities. The Channel Islands and IOM are stuffed with them. Someone like Hamilton earning £50m a year leaves and it requires over 4,000 UK citizens on average wages to make up the tax shortfall.”
He is wrong, in that government money creation and spending comes first. Also, if higher earners leave the UK, there would be more retained earnings to pay lower earners more, who would in turn pay more income tax and NICs.
Tax havens can be tackled by financial and legal mechanisms. Banks, law firms and accountants in, say, Canary Wharf or the City are easy to find as they are in large, easy to find buildings, so their assets could be frozen or seized if they facilitate illegal behaviour
[…] savings need to change so that these savings are redirected to funding the Green New Deal, and as I have noted this morning, tax really does have the power to do […]
It is extraordinary the difference this small “tax holiday” seems to have made to the volume of transactions – simply saying that there is no SDLT on property purchases up to £500,000, versus the usual rule of zero on the first £125,000 then 2% on the next £125,000, then 5% on the next £675,000, and so on. It saved at most £15,000 per purchase, which is a sizeable chunk of cash to pay in one go, but at most 3% of a £500,000+ purchase. For the average house price in the UK, around £270,00, it saves at most £3,500.
(Incidentally, the holiday is not entirely over yet: still no SDLT on the first £250,000, until 30 September, so that is still a £2,500 saving.)
The Resolution Foundation has recently argued that house prices would have risen anyway in the last 18 months, due to increase levels of saving and low mortgage interest rates, as they have in other countries without the “holiday”, and so the SDLT “holiday” was both unnecessary to support house price, and wasteful, giving away about £5billion of tax revenue with most of the benefit going to wealthier people buying above-average houses. https://www.resolutionfoundation.org/publications/housing-outlook-q3-2021/