Coffee House

The taxing question Labour can’t answer

17 February 2013

1:13 PM

17 February 2013

1:13 PM

The details of Labour’s mansion tax proposal remain, to put it politely, sketchy. Here’s the exchange between Andrew Neil and Sadiq Khan on the Sunday Politics on how Labour would work out which homes are worth more than two million pounds:

AN: Do you rule out a re-evaluation of all properties?
SK: There are a number of options to look into.
AN: Do you rule out a re-evaluation?
SK: If it meant those hardworking people having to pay more council tax then obviously it would be something we wouldn’t want to do, but there a number of ways of doing this, Andrew, for example, you could have a one pence levy on those whose properties are worth more than £2 million, for example, the Lib Dems have suggested having a 7% stamp duty on those whose properties are above £2 million and you’ve just given a third option which is re-evaluation of council tax bands.
AN; And everybody’s council tax will go up?
11:20:14
SK: That’s the concern about that option, and that’s why rather than simply saying today it will be in our Manifesto, no matter what, what we’ll do is we’ll do the work between now and the next General Election, we’ll see if we can afford it and then that will be our aspiration.

What’s striking about Khan’s answers is that he appears to be suggesting that higher stamp duty, which is not an annual levy but a one-off tax, could suffice. So, according to this member of the shadow Cabinet, Labour isn’t committing to a mansion tax but rather just more property taxes.

For Labour’s announcement to be credible, they have to be able to answer the question about how they’ll determine which houses are worth more than two million pounds. Until they can, this’ll be a gesture not a policy.


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Show comments
  • Watcher

    Phew I am relieved, canvassing at the last election I told lots of people labour would introduce property taxes. Now quite clear that they intend to and it will follow the course of all other taxes, all house owners will eventually pay a capital tax on top of Council tax.

  • Roy

    It’s about time governments thought about regulating their spending rather than ever on the hunt for further pickings to pilfer. Can they no longer do simple maths, couldn’t they learn how to say no to further spending. Stop competing with one another to see who can give away the most. Pull your horns in and live within your means for God’s sake. Every householder and business has to do it, so should governments who think nothing of taxing you ten time over.

    • Colonel Mustard

      Amen to that.

  • Powder

    I have a much better idea.

    1. Introduce a 50% Stamp Duty (yes, 50%) on all residential property purchases by people resident outside the UK for tax purposes (including non-doms), and for people who use companies or a third party to buy their house. And make it retrospective – five years will do nicely. Then, introduce a general anti-avoidance rule so that a property transaction cannot legally be completed until HMRC receives a nice fat cheque from the foreigner and/or (would-be) tax evader.

    2. Scrap Stamp Duty on ALL property purchases by British taxpayers. No British taxpayer should be taxed on buying themselves a home. Ever. Not a penny.

    3. Introduce a new form of CGT on a sliding scale on the profit from property sales. It will no more stop anyone “climbing the ladder” than the current tax on purchases does.

    4. Remove all tax relief on residential property investments (i.e. BTL).

    • http://twitter.com/MisterQuintus Tony Quintus

      A: Wouldn’t raise a penny, it would simply stop the inflow of money into the UK property market
      B: Why not, we are taxed on buying everything else.
      C: CGT is already payable on non primary residence property sales, to tax sales of residences would effectively stop people from ever moving house in a rising market, even to a property of the same value at the time of purchase. It would also be tantamount to taxing people simply because of inflation.
      D: Wouldn’t work, BTL doesn’t have relief, it is simply a case of offsetting profits against cost, as it is in any business. You cannot tax on turnover, no matter how much some quarters might want to these days.

    • James Strong

      Retrospective legislation should be opposed at all times, in all areas.
      Intoduce it and there is no end to the possible powers of the state.
      Otherwise, your point 2 is very appealing.

      • petermorris

        Retrospective legislation should be opposed at all times, in all areas, except where there is widespread abuse. When people on benefits and the disabled are being asked to tighten their belts and the rich carry on as usual, there needs to be some day of reckoning. Retrospective legislation is the thing to do it.

    • Daniel Maris

      Powder –

      The problem with removing stamp duty for Brits is that there is such a shortage of housing – at least in the southern half of the country that any stamp duty reduction will result in a rise in house prices.

      But I agree we should be prioritising UK citizens for housing. Anyone coming in should pay an infrastructure levy to cover the cost of their housing and other infrastructure costs.

  • Derek

    This is a an indictment of the way in which property is now viewed. It is somewhere to live and it’s value should be largely academic. Sadly since 1996 the national obsession has been on how much we could borrow from the rest of the world to pump up house prices which are only a matter of opinion until someone stumps up the cash to buy t and pay a fortune in stamp duty. The idea these assets have a fixed definable value to be annually taxed on an ad valorem basis is rife with opportunities for the state to display its prowess at being wildly inaccurate and overbearing.

  • Daniel Maris

    The easiest thing would be to place a legal duty on everyone with a property worth over £2million to declare it for tax purposes. This could be crossed checked against stamp duty details. Where there was doubt, there could be a system of valuation (one government and one for paid for by the householder) with the householder recompensed if the valuation comes in under £2million. Simples. You have to remember Khan isn’t the brightest button on Labour’s jacket.

    • David Ossitt

      “The easiest thing would be to place a legal duty on everyone with a
      property worth over £2million to declare it for tax purposes”

      The easiest thing and in fact the right and proper thing is to drop this nonsense once and for all.

      The very best thing would be to stop all silly expensive give backs (tax credits), to stop all encouragement to breed like rabbits (child benefit) and simplify all taxes.

      A good start would be to raise the personal allowance threshold to £15,000 per year, to then allow working husbands with stay at home wives (or visa versa) to have their spouses allowance added to their own and then to have a simple single tax band of 24, 25, or 26%.

  • HooksLaw

    The plain fact is he would not rule out a revaluation. Says it all.

    And given the news about North Staffs, will be BBC be denying Alan Johnson the sinecure of sitting on Brillo’s couch given his refusal to order an enquiry?
    http://www.telegraph.co.uk/news/uknews/9875660/Mid-Staffs-Labour-Government-ignored-MP-requests-for-public-inquiry-into-deaths.html

    • petermorris

      When anyone in a house that is over the value of what £320K in 1992, pays the same council tax then that is a subsidy from the less well off to the very well off and that needs a looking at. People living in £5 million mansions pay the same council tax as someone living in a £320K house? That is wrong.

      • ReefKnot

        Why is it wrong ? Surely, if both people receive the same services then they should pay the same. Or are you saying that people who live in expensive houses should pay more for the same ? How is that right or fair ? It’s like saying that people who live in expensive houses should pay more for bananas or petrol. It defies logic.

  • http://www.facebook.com/barbara.stevens.790 Barbara Stevens

    So the Socialists intend taxing homeowners over 2 million, but will it stop there? Knowing them I think not. I watched Khan today, his answers were not open answers at all; in fact he exposed Labour’s weakness when it comes to property ownership. They’ve always disliked home ownership, yet many of the front bench are just that. Its such a silly idea, people will just relocate elsewhere and take their wealth with them and invest it where they settle. The people in the middle should be wary of this idea, for if it proves lucrative it will be expanded by socialists when they see the benefits of it. Traditionally Conservatives have always thought money gained from property which people have worked to pay for over many years, often sacrficing many things to do so is sacrocent. It seems if left to Labour and the Lib Dems homeowners will be made to pay for self detirmination and reliance on no one but themselves. We now see Lib Dems suggesting taxing jewels as well, well I’m out of that one don’t own any. What are we coming down to? Are the strivers being made pay for the mistakes of bankers and Labour, who will be assisted now by Clegg. Or is it he wants to remain in government and will side with anyone willing to stand with him. What a person and party they have turned out to be. I wouldn’t touch any of them with a barge pole, and an extra long one at that. The Conservatives need to get their act together if need be ditch Cameron, who seems to be the one thing stopping the polls from increasing his party going forward. The policies appear coming right, but the person delivering them is wrong.

    • petermorris

      I don’t think Labour opposes home ownership. They probably believe that people on benefits and the disabled should not be the ones paying for the economic crisis and perhaps those people living in multi million pound houses might just have more resources available to contribute in this time of need.

  • http://twitter.com/Greenslime3 Andrew Taylor

    So the great majority of owners of the (relatively) few properties which would fall inside the perimeter of this pernicious idea will have already paid 40, 50 or 45% tax on their salary, and will have paid 7% Stamp Duty on the purchase. They will also be paying the highest level of Council Tax.

    Sounds to me that they are paying an awful lot of money into the Exchequer already, just for owning the house.

    I recall a Labour councillor telling me that he didn’t care how much Council Tax went up because the people who voted for him didn’t pay it anyway. This ‘Mansion Tax’ policy is just such a nasty little bit of positioning. The people who don’t have are always jealous of those who do (I am unemployed right now. I have to fight hard not to join them). It is an easy call to take a jab at the seriously wealthy. But remember, in tax-take terms, those people who you target are the ones who contribute the vast majority of the income tax take (and, I suspect, VAT and other consumer taxes). The wealthy can up-sticks and clear off – note all those lovey celebs who support Labour from their homes in Hollywood, Switzerland and Monaco. Milliband may not believe that they will really go but beware, there is a tipping point and it is closer than he thinks. If they do depart, Labour will need to look lower down the wealth chain to cover all its unfunded idiot ideas.

    They might have an argument about raising cash from the Greeks and Arabs, et al, who are not domiciled here, who do not contribute anything and whose ownership is about investment and tax avoidance in another jurisdiction. Those are not the super-rich we want to attract here. We need the entrepreneurs and creators who are coming here, not only because it has a sensible tax regime, but also because this is a great country to live in with an educated, flexible workforce with a history of inovation.

    Labour’s noise is just about creating gotcha moments in parliament rather than anything realistic or achievable. Our over-complicated and inefficient tax regime – which, remember, was largely crafted by one G Brown Esq., whose knee both Balls and Moribund spend much time sitting on in the late 90’s and early naughties! – needs a complete strip-down and rebuild. Now what politician has the bottle to do that, because she or he would have my vote in the blink of an eye.

    • Andy

      What you say is all true. What we should be looking at is simplification of the Tax System, which is now so complicated no one properly understands it. I favour a flat tax, and once we have such a thing it will be much more difficult for politicans to promise the earth when we can all see they can’t pay for it.

    • HooksLaw

      ‘just about creating gotcha moments in parliament’

      correct, but there is a by election and labour just want a gimmick for the doorstep.
      everything about the above interview just shows what a sham the whole thing is.

    • telemachus

      Wrong wrong wrong
      The majority of folk due to pay the tax squirrel the majority of their income thru tax avoidance schemes
      While the poor and middle income earners actually pay their taxes

      • James Strong

        Do these people who use tax avoidance schemes pay any less than their legal obligation?
        No, they don’t.

        • telemachus

          That surely is not the point
          Folks lower down the income scale do not have access to advice that would enable them to squirrel their money into such schemes

          • Peter Bennett

            Then surely as the previous post suggested we should simplify the tax rules so such advice is no longer necessary.

            • Andy

              We should. Lets have a Flat Tax.

              • petermorris

                A flat tax would penalise the poor.

      • Andy

        It is true the Miliband’s did use Tax avoidance. THis what you mean ??

        • petermorris

          I am not sure about that. But half of Camoron’s cabinet have interests in off shore tax havens.

      • petermorris

        Yes – a lot of houses in London over £1 million are apparently owned by companies in off shore tax havens, so when a house is sold, it is not registered as a property transfer because the company is sold from one person to another. No stamp duty is currently payable. I expect no mansion tax would be payable either.

  • http://twitter.com/Shinsei1967 Nick Reid

    Stamp duty is ALREADY 7% for £2m properties.

    • Powder

      Yes. And I believe there is a documented case of someone paying it once.

    • petermorris

      But nobody pays it because they use off shore tax haven companies to avoid actual property transfers. The companies are simply sold from one person to another and no stamp duty is paid.

  • huktra

    I am very much in favour of a mansion tax set from one million and piloted in Islington.

    • telemachus

      Cynicism ill becomes you
      We are long overdue for the fairness of wealth taxes
      The basic problem is that defining “income” becomes progressively more difficult as income and wealth rise. Straight wage income is relatively easy to define and tax for middle-income earners—through the personal income tax. But wealthy people live much more off returns from their asset holdings. They receive capital gains, stock options, interest and dividends; and carried interest for owners of hedge funds that, to avoid double taxation, are taxed at lower rates than wage income. They may receive imputed rental income from multiple homes and major consumer durables such as automobiles, art collections or yachts, which income tax misses altogether.

      In order to have a fairer tax system, we should implement a new federal wealth tax in addition to the federal income tax. Unlike the current income tax, the wealth tax would not rely on how income is defined. Rather, it would require that households list all their domestic and foreign assets on, say, Dec. 31 in the relevant tax year. With a large exemption of $3 million that effectively excludes more than 95% of the population, a moderate flat tax—say 3%, on wealth so defined—could then be imposed.

      • James Strong

        We should simplify the tax debate.
        For the next few months we should repeatedly ask the questions, ‘Whose money is it?’ ‘Why do you think the state should take it?’
        I think telemachus and I would come up with very different answers, but I’d still like to see those blunt questions asked of our politicians.
        And in my fantasy world I’d like to shoot them full of a truth drug, because I suspect Miliband and Balls, if andwering truthfully would say’ The money is ours, not yours.’
        Instead of trying to find ways of increasing taxes let’s find ways of drastically reducing them.

        • telemachus

          The question is not whose money it is but how do we order a peaceful and just society
          Any earned money is earned in the framework of our society
          Like any club there have to be subs to make the club run effectively
          I first observed this as a wolf cub

          • Colonel Mustard

            No, the question is the amount of money the “club” spends and on whom and what. It is not about making the “club” run effectively but making it run cost effectively. The government is profligate with other peoples money and subsidises elements that increase cost to no good purpose for the majority of people as well as pursuing extravagant and foolish policies that increase its own costs.

            You, as a socialist, think money grows on trees and is the answer to eradicating poverty. Well, there is going to be a lot more poverty and it will have been caused by your profligate socialist policies on so many levels.

            The government doesn’t “earn” money. It spends it. And too much of it. The public are taxed on the money they do earn to supposedly fund the government administered infrastructure that directly benefits them – not because they are “rich” or fit within some other category. Every time the government signs a cheque they should be asking “Is this necessary and does it directly benefit those whose taxes are being used to pay for it?” If the answer is “No” or “No” then the money should not be spent. A government is not a charity or a world social worker.

            • telemachus

              In my club I would wish enough subs to allow the weak and vulnerable a decent living

              • RobertC

                When the weak and vulnerable have a higher standard of living than those who need to sweat and toil to put food on the table for their own families, it bears no resemblance to a club at all!.

              • ReefKnot

                Vulnerable to what ?

          • Andy

            All taxation is theft. We should move towards a basic and simple Flat Tax. We should also impose limits on the amount the State can borrow.

            • petermorris

              Yes, anyone with a house worth more than one million pays the tax. Anyone below that: nothing. I would like to see that!

      • Colonel Mustard

        Cutting and pasting from the Wall Street Journal now, eh? At least you might have used quotation marks.

        “The Conservative Case for a Wealth Tax”:-

        http://online.wsj.com/article/SB10001424052970203462304577139232881346686.html

        • Andy

          Not only did he not use quotation marks, he did not attribute it as he should have done. And it is a gross breach of copyright law. The Speci modorators should delete it or cut the post so it does conform with copyright law.

          • telemachus

            Read it carefully and you will note the changes

  • anyfool

    What’s striking about Khan’s answers is that he is so blatantly trying not to give an answer, evasion and lying the order of the day.
    This is all you will get from these liars till after the election.
    When is Andrew Neil going to treat ethnics with a little bit more rigour, or is he another man who thinks anyone who is not white, is to culturally sensitive to be made to speak the truth.

  • http://twitter.com/reesmf Matthew Rees

    The claim that every house need to be revalued to see if they cost more that £2m or not is clear nonsense and if that is the only argument against it that the Tories have got then they are in trouble. For information, the average house price is only £162k and we know how much houses have sold for over quite a few years now so there are only a few places that we have to look for £2m mansions and we know where they are.

    • Fergus Pickering

      If there are only a few places then it won’t raise much money, will it? This is standard Labour. We will solve every problem by taxing the FILTHY rich, nobody you know.

      • http://twitter.com/Shinsei1967 Nick Reid

        It will raise £1-2bn. Depends whether you think that is worth the bother and the cost.

        I suspect it won’t. Better (economically) to have a full-on revaluation of all council tax bands. But that’s too unpopular to fly.

        • Nkaplan

          Whether it is worth the bother of course being the only consideration.

          No need to consider whether charging people a £20,000 a year penalty (regardless of what income they have, if any) simply for having the audacity to live in a home that has increased in value due to the government’s own ludicrous planning restrictions, is morally justified; those nasty rich folk deserve all they have coming to them.

        • Fergus Pickering

          How do you KNOW it will raise two billion? Back of an envelope?

        • petermorris

          That’s too fair to fly!

      • HooksLaw

        Labours solution is to tax the filthy rich 3 times over. Its easy in opposition, especially when you are only relying on thick people to vote for you.

    • Colonel Mustard

      Where are they? Are you going to publish a list somewhere in typical lefty axe-grinding fashion to name and shame the occupants? Is there a lefty website called “Mansion Watch”? Once you’ve persecuted the “rich” who are next?

      I’m surprised you didn’t use the term “mansion”, synonymous with “toffs” and duck houses. Because we all know that the great horde of wealthy lefty apparatchiks and quangocrats bleeding this country of its wealth and soul don’t live in “mansions”.

      • http://twitter.com/Shinsei1967 Nick Reid

        Well for starters you’ll only need to revalue those houses that are already in the top council tax band. Not many Band C houses will have become £2m properties since 1992.

        But look at a few post codes in London and the SE, and anything called the Old Rectory, Manor or Hall in a village and you’ll be 95% there.

        • Colonel Mustard

          But I don’t want to be 95% there. I want Euro-politicians to f**k off and cut the size of their bloated governments first. Call it a Big State tax if you like.

    • Nicholas chuzzlewit

      “we know where they are” : sounds like you already have your flaming torch and pitchfork at the ready. The mansion tax would, according to St Vince, raise circa £1 billion around £6 billion short of the resources needed to restore a 10% tax rate. I suggest that if you are sufficiently productive to own your own home, the taxman will soon come calling for your contribution to Ed’s most recent fatuous gimmick. Also, the Market in £2 million + properties is not disconnected from the rest of the property market and the depressing effects of such a tax will soon have a proportionately negative effect on your dwelling. Assuming, once again, that you are sufficiently productive to own a house.

      • HooksLaw

        The measure neatly encapsulates what Labour is all about.

    • HooksLaw

      So by your argument the proposed tax would not in fact raise the money necessary for its objective.

    • petermorris

      The current council tax system values houses at their 1992 values and anything built after that at its actual cost or something similar to that. The re-valuation to today’s values could probably be done as a desk top exercise and fairly accurately too. The top band in 1992 was something like £320K.

  • Colonel Mustard

    Here’s an idea for Meneer Clegg and Herr Miliband – tax the government instead and re-cycle the money. Still plenty of fat and waste in that joint (literally).

    • http://www.facebook.com/barbara.stevens.790 Barbara Stevens

      Better still ‘stop the rot, dump the lot, and vote ukip’.

  • http://twitter.com/220_d_92_20 David Boothroyd

    Here’s a challenge. Justify in principle the decision to continue indefinitely to assess a property valuation based tax (Council Tax, in this instance) based on property values as they were in 1991.

    You might be able to justify it in practical political terms but there isn’t any justification possible based on principle.

    • HooksLaw

      Why should the value matter when you simply adjust the rate its levied at?

      • Daniel Maris

        Because values change. Someone in London in a house close to where a tube station has been built since 1991 will not be paying the commensurate amount of tax.

        A system of self-assessment with adjustments on sale (via stamp duty where there has been undervaluation) would be best. It would be v. easy for the authorities these days to identify attempts at deliberate undervaluation and arrange in those small number of cases valuations (paid for by the householder if they have undervalued).

        • Colonel Mustard

          Don’t encourage them by joining their game of how to steal more money to pay for bloated government.

          • dalai guevara

            does that include the military, colonel? 😉

            • Colonel Mustard

              Do we have a military government? Be still my beating heart. Could probably extend the cull to MOD and project wallahs.

        • HooksLaw

          How many tube stations have been built since 1991? Any difference if there is one is marginal. In broad terms you have a 2 bed or a 3 bed or whatever and the relative value is based accordingly.
          And of course poor little granny who has not sold up and moved out would get stuffed by such a revaluation.

          • Daniel Maris

            Well you can’t live in London, otherwise you’d know about the Overground Line on the Underground – must have added about 20 stations to the Tube Network. Plus there’s DLR which I think has expanded as well.

      • ReefKnot

        Exactly.

  • Colonel Mustard

    If the Conservatives had any people in their operation with the grit to fight they would have immediately branded this proposal Labour’s Striver’s Tax. Instead they are probably beavering away trying to do the same thing (e.g. find new ways to rob people who actually work for their money) but calling it something else instead. Then, here in the Land of Spin, PPEs and Very Expensive Government, Labour would properly denounce it with a pejorative epithet that would be taken up by every man, woman or transgender and their dogs.

  • andagain

    This is a toe in the water, not a policy.

    Having said that, taxing wealth rather than income looks like a welcoming bit of water for Labour to explore.

    • HooksLaw

      You think taxing wealth creation is a good idea. Who do you think creates the jobs?

      • andagain

        Taxing income is generally a tax on wealth creation. Taxing house prices is not.

        Indeed, to a great extent, it is a tax on planning restrictions which send up the price of housing. Which is to say, it is a tax on preventing the creation of wealth.

  • Russell

    The tories should no doubt announce that they intend to get rid of the basic rate of tax completely.

    Of course this is only a desire and to show the ‘direction’ they want to head in, and of course they cannot say now if it will be in their manifesto, as it depends very much on what the economic circumstances are before the 2015 election!

    What a load of rubbish from Miliband, Balls etc.

    • telemachus

      The actual Balls is the economic policy of Osborne which is not only not fair but denying us the prospect of growth and the higher employment that comes with it
      I would put a thousand mansion taxes as priority above the current obsession with cutting benefits for the poor folk in wheelchairs

    • petermorris

      If you get rid of the basic rate of tax doesn’t that mean, by default, that the next level or rate of tax becomes the basic rate of tax?

      • Russell

        Obviously I should have specified the current 20% rate of tax, or current lower rate of tax, for people like yourself who didn’t understand the point I was trying to make!.

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