Opinion: The Mansion Tax is unfair and illiberal

Since 2010 the word ‘fairness’ has been deployed on an industrial scale across the political spectrum.

To want ‘fairness’ is to want a distribution of the spoils which reflects the value of the contribution of each to the economic and social resources of society. A fair tax system should seek to tax according to capacity to pay. It must also act to discourage those, such as polluters, whose economic choices negatively impact on society.

It must encourage those, such as in renewable energy development, whose economic activity has the potential to positively contribute to society. The next category when looking at the efficacy of a tax is the ability of the tax to contribute to economic stability.

On each of these criteria the Mansion Tax is a bad proposal.

It’s not equitable because the cash-poor asset-rich owner of a large house is liable for this tax, while a property speculator who has ten houses worth 250k each is not. The person in the £2million house may have bought it for much less, and is not gaining economically from its value. The speculator is living off the rents and making it harder for first time buyers to get into the market, while rising rents impact on the wider health of the economy.

Advocates of the mansion tax argue that those who buy houses as investments will seek an alternative investment if they have to pay the tax. This, they argue, will mean that less demand at the top of the housing market will trickle down to more affordable housing for first time buyers. This is fallacious, as in many of the cases in London properties are bought not for investment in the purely economic sense. The priority is to have assets held in a country where, unlike some of the other assets held by oligarchs and plutocrats, they cannot be lost at the whim of political change.

Supporters of the mansion tax argue that cash-poor home owners can either roll the tax bill into the equity of the house, by borrowing from the bank to pay the bill, or by waiting until after their death and giving the government a share in the equity of the house.

This would be a disaster.

In the first instance, any sentient banker would rather lend a comparatively small amount of money against a £2million house than lend to a first time buyer, as the £2million house will not lose its value by more than the amount of equity taken out, while the first time buyer’s house could collapse in value by more than the value of the mortgage.

At a time when the rhetoric is about ‘the banks lending more’ to help small businesses and first time buyers, the Liberal Democrats propose a tax which will hinder such lending.

Giving the government an equity stake in the £2million house until after the taxpayer has died, falls into the final trap which must be considered when framing tax policy.

A tax must cost less to collect than the amount which will be raised. I anticipate that there would be numerous court cases if the government looks for a share of the house’s sale price after death.

A fairer tax system should target second home owners, and particularly buy-to-let home owners. This group inflate prices and rents, restricting entry to the market for first time buyers. They benefit from a boom and enhance the chances of a slump, the capital gain on the house is unearned wealth, and they profit from rising rents.

* David Thorpe is a member of the Liberal Democrats in Newham, and works for an economics publication.

Read more by or more about .
This entry was posted in Op-eds.
Bookmark the web address for this page or use the short url http://ldv.org.uk/31160 for Twitter and emails.

61 Comments

  • david thorpe 29th Oct '12 - 4:46pm

    @ jon

    I agree-I think the solution is to revise the council tax bands-far simpler than a mansion tax-but also less headline grabbing

  • You can tell Halloween is approaching, because there are plenty of bogeymen deployed here.

    I can only guess when you say “not gaining economically from its value” you mean that house price increases don’t provide the owner with immediate capital. House prices have a value that just sits there on paper adding nothing to the wider economy. By taxing their value, some of the socially-created value of a house to be put to good use by the public sector.

    The proposed mansion tax is not expected to raise more than £2 billion per year. Even if every penny of that was raised from bank lending, that’s still a drop in the ocean in terms of the amount of credit that is provided by banks. Also, isn’t there a ‘lump of credit fallacy’ being committed here? Every pound lent to one borrower does not automatically mean 1 pound not lent to another. And while owner-occupiers do not explicitly earn rent from their property, they are implicitly earning rent by living in the house rent-free and avoiding paying the rent that would otherwise be due. The asset-rich get to live in a mansion rent-free, while the rest of us have to work to pay the rent (and have our income taxed in the process). This isn’t fair.

    Parliament would obviously need to legislate for a mansion tax to be legal, but subsequently there’s no way that a court case against the government would succeed. There’s certainly no breach of human rights. This argument is nothing more than a scare tactic.

    Yes, mansion tax isn’t perfect and it doesn’t solve everything. Multiple property owners can be just as wealthy as mansion owners but won’t get taxed the same. However this is a clear case of making the best the enemy of the good.

  • All your points give good cause for thought and I think they’ll be especially relevant if the mansion tax turns out to be the thin of the wedge to a massive move to property or land value tax than just a mansion tax, which if applied as intended as 1% of value over £2m and operates as an additional council tax band (hence no new collection mechanism which I think is one of the things that did for the idea as proposed by the late ’70s labour government) seems a reasonable way of generating extra revenue, in reality owners of very expensive homes tend to have a range of sources of wealth to draw upon. An obvious source of such wealth is unearned income and equalising its tax rate with earned income seems to be reasonable although probably highly unpopular especially as I think it ought to include inheritance tax.
    I do think though that there is a danger of the tax being seen as a silver bullet and over used it would be very unfair in the ways that you suggest and the reasons you suggest.

  • All your points give good cause for thought and I think they’ll be especially relevant if the mansion tax turns out to be the thin of the wedge to a massive move to property or land value tax than just a mansion tax, which if applied as intended as 1% of value over £2m and operates as an additional council tax band (hence no new collection mechanism which I think is one of the things that did for the idea as proposed by the late ’70s labour government) seems a reasonable way of generating extra revenue, in reality owners of very expensive homes tend to have a range of sources of wealth to draw upon.
    An obvious source of such wealth is unearned income and equalising its tax rate (& indeed of all tax rates) with income tax seems a better idea, although probably highly unpopular especially as I think it ought to include inheritance tax.
    I do think though that there is a danger of the mansion tax and various embellishments to it being seen as a silver bullet and over used it would be very unfair in the ways that you suggest and the reasons you suggest.

  • david thorpe 29th Oct '12 - 5:22pm

    @ duncan stott-they are onyl gaining form the capital increase if they borrow against it -which many dont want to do-and which we should nto encourage them to do-also the point about putting a chareg against the land-this would mean increasing the amount of astate revenue relaint on houses holding their value-which is exactly the opposite of what we need-also if the hosue is held offshore-what happens then.

    As for the frop in the ocean argument-the tax wont raise 1 and sixpense in my opinion, but t disregard the impact on first time buyers at a time when all the rhetoric of state-0from left and right is abotu getting the banks to lend more-you are happy for them to lend less-if thats what the government whats to happen-that banks lend less rather than more-then they should adjust their other polici8es accordingly-we need an increase not a static amout or a decline-and you are disregarding the impact of a decline? Its nonsense in the extreme-and targets the wronfgpeople
    target the owner of a buy to let house-they are causing real damage to the economy-to its very fabric=-the mansiaon tax will raise nothing of any substance except from areas where we least want to take money

  • david thorpe 29th Oct '12 - 5:23pm

    you cant put all the pwoer of government behond lets get the banks to lend more-then pursue a policy iof lets encourage them to lend less-its inneffient and noty joined up thinking-the amount is almost irrelavmnt-especially asthe tax will raisenothing-now taxes which raise nothing are fine if they provoke behavioural change-but people living in hosues bought for occupation not speculation are ‘not ‘behaving’ in the economic sense they are p[assive-so the tax has no function

  • I do not see how increasing taxation of the rich is ‘illiberal’ especially when the country is financially on its knees and the people at the bottom of the ladder are paying for it. I am not convinced that there are many people living in two million pound homes who are no better off than an ‘ordinary’ person. It’s time the wealthy also felt the pinch like the rest of us.

    I also like the idea of increasing taxation for landlords who own numerous properties and increase rents through the roof. David Lloyd George wanted to do the same thing in the late 19th century.

  • david thorpe 29th Oct '12 - 5:28pm

    one of cable’s argumenst abhoutt his is that you cant move property offshore-for an intelluigent man thats one of the most stupid things I have ever heard-most of the porerties held in the one hyde park development are offshore in the economic sense-collecting the tax from them will be impossible-if its targeted at the plutocrats they are the one group who wont be forecd to pay-the granny in the hosue who isnt rich-will have to pay-the poorest suffer-which is why its unfair-those who damge the fabric of the economy most(the buy to let ‘tycoons’ wont have t pay.

  • david thorpe 29th Oct '12 - 6:01pm

    @ phil-yes but who is going to pay it-all of the peoprty;s in one hyde park are registered in the UK-but most dont pay council tax as it is-

  • I’m also supportive of reforming Council Tax to add multiple new higher rate bands.

    However I don’t think it’s anything other than divisive to go around bandying about criticisms of ‘illiberal’ against things you don’t like, as this detracts from the important debate to be had, by turning it from a practical matter of collection to an ideological matter of morality.

    Since we know different people adhere to different personal standards, basing an economic argument on preconceived versions of morality is a guaranteed way to make sure your sums don’t add up: tax must be amoral, like death; law is moral. It’s when these two get mixed up that governments get into trouble.

  • David, I’m sure mansion owners don’t want to pay mansion tax. I don’t want to pay tax on my income, but I don’t get a choice in the matter. It’s about what’s fair, not what one highly privileged and lucky group of wealthy mansion owners want.

    The fact of the matter is we currently tax ordinary working people who are on well below the average income, who’s hard work contributes to economic growth. Meanwhile the mansion owners sit back, watch their mansions flourish in value as the economy grows through no work of their own, then whinge when anyone mentions how unfair this is. Unlike income taxes, property taxation is the least damaging way to tax according to the OECD (indeed I’d argue taxing property is actually positive for growth).

    Mansion owners need to accept that they can’t hoard all their unearned housing wealth while the working population struggles to pay soaring rents from their taxed income. The mansion tax is a popular step on the long journey to bring some real fairness back into the tax system.

    And no, we don’t want banks returning to their bad old ways of reckless mortgage lending to risk-averse first time buyers (or any other house buyer). Unrestricted mortgage credit is what partly to blame for pumping huge amounts of money into the housing market and causing house prices to become unaffordable for first time buyers. Pushing more and more debt to sustain unaffordable house prices is totally unsustainable.

    How come you are happy to see council tax re-banding? If you’d be happy to see more expensive bands with higher tax rates, how is this any different to creating a mansion tax from the mansion owner’s perspective?

    Collecting mansion tax from overseas owners who aren’t paying is easy. You accumulate the tax owed on the property and get it back whenever the deeds change hands. Dr Vince is spot on.

    Yes, buy-to-let needs tackling too. Switching council tax liability onto the landlord rather than the tenant would be a good start. Getting rid of buy-to-let tax perks such as tax-deductable mortgage interest (worth £2 billion per year) would be another.

  • >Collecting mansion tax from overseas owners who aren’t paying is easy. You accumulate the tax owed on the property and get it back whenever the deeds change hands.

    But the deeds don’t change hands, only the names of the shareholder(s) of the off-shore holding company …

  • I support the Mansion Tax idea, as promoted by Vince Cable and in our Manifesto, so cannot agree with the argument that it is “unfair and illiberal”. Essentially I agree with Duncan’s comments above. Also I would go further and support a higher rate of inheritance tax because I believe in equal opportunities – not the inter-generational transfer of large amounts of wealth and property! More specifically, on the issue of the Mansion Tax:-
    1. This is a tax based on something physical, which cannot be easily evaded or avoided unlike many other assets.
    2. A property worth £2 million is a significant amount, even taking into account house price inflation in London and the South East of England. The people who bought it would have had a significant amount of capital and/or a very large mortgage (presumably based on their income). Personally, I do not know anybody who owns such a valuable property. In my world (presumably the 90% who either let or have small to medium size properties!) people feel that the wealthy should pay their fair share of taxation.
    3. Opinion Polls have shown the idea of a Mansion Tax to be popular!
    4. What are your alternatives and other sources of raising taxation on a fair basis?
    5. I am a long-standing Liberal and Liberal Democrat and we have always supported a fair and progressive taxation system. The word “progressive”seems to be out of fashion with some of the “Orange Book Tendency”. I wonder why?

  • David – you’re spot on, glad someone’s been brave enough to call out Emperor Vince’s nakedness on this one.

    – it’s unfair, penalising people living in the South East who suffer – rather than benefit – from high house prices. It also takes no account of real, net wealth, i.e. someone with a £2m house and £1.9m mortgage pays it, whereas someone with a £1.9m house and no mortgage pays nothing

    – it’s inefficient and unnecessary: even Vince’s own numbers suggest it would raise less than £1bn, and when you factor in the need to build a whole new bureaucracy to administer it, the net present value of deferred MT etc the net revenue from MT is insignificant and possibly even negative. So it certainly contributes nothing towards deficit reduction.

    – it is detrimental to the environment, as it will disincentivise home owners from investing in insulation, green energy etc that would enhance the value of the property (contrast this to Land Value Taxation, which incentivises such improvements)

    – it is centralising, taking all the revenues for central government by contrast, for example, to LIT or LVT

    Just about any other options is preferable to Mansion Tax and the sooner we drop this the better.

  • Matthew Huntbach 29th Oct '12 - 9:14pm

    Dominic

    it’s unfair, penalising people living in the South East who suffer – rather than benefit – from high house prices.

    Yes, you will hear wealthy commentariat people in the South East say that – because they seem to believe the only people that matter are people like themselves. So they suppose everyone in the South East is living in mansions, or stands to inherit a great big dollop of cash from their parents’ mansion, and so will suffer from this tax.

    The reality is that because this sort of tax will bring house prices down, it will be people in the South East who BENEFIT the most from it, because it is people in the South East who are suffering most from house prices being pushed beyond their reach.

  • “A tax must cost less to collect than the amount which will be raised. I anticipate that there would be numerous court cases if the government looks for a share of the house’s sale price after death.”

    Why? Are there numerous court cases concerning Inheritance Tax or Capital Gains Tax? Er no.

    The value of any property is mostly made up from is location value, not it’s physical value. As such, owners are consuming location values as rents, or imputed rents. What right does the owner have to this revenue stream? They have done nothing to create or sustain them themselves. It’s government spending and wider economic activity that does.

    It’s what is known as getting something for nothing. That is why taxing these unearned incomes produces no deadweight costs.

    Like all forms of consumption, if you haven’t got the readies to pay for it, better look for a cheaper alternative i.e downsize.

    Only this very simple fact of life doesn’t appear to apply to property owners though does it? Why? I think it’s because we see this legalised form of theft as our right. Morally wrong and economic idiocy.

  • Andrew Suffield 29th Oct '12 - 10:20pm

    The person in the £2million house may have bought it for much less, and is not gaining economically from its value.

    Then they should sell it, and buy something they can afford to live in. Through an equity release scheme if appropriate.

    This isn’t complicated. (And sob stories about the poor widow, a mere £2m to her name, being forced out of her house? Not compelling.)

  • The author does not make a credible argument as to why this tax could not be easily collected. As Tom Papworth points out there would simply be a charge on the property in the event of non payment. The author states

    “I anticipate that there would be numerous court cases if the government looks for a share of the house’s sale price after death.”

    I would think this unlikely. The property would be sold and the surplus returned to those who have the right to inherit. I understand the Mansion Tax to be one of the eaiest taxes to collect. This is a major benefit and the author is not on strong ground when they imply that it will be hard to collect.

  • Matthew – as David has pointed out in his piece, this would have no impact on “driving down house prices”. It would however hit a number of large Bengali families + a number of people with large mortgages and small net wealth in both cases living in ordinary family homes in London that don’t look anything like “mansions”.

    There are better ways to tax property (LVT, extra council tax bands, frankly pretty much anything is better than MT) so why have we got the worst version foisted upon us?

  • This is another version of the “parents make sacrifices to send kids to private schools” Tory argument . Actually many asset-rich cash poor take value from their property for an income which is repayable from sale of the property. If finance companies are doing this is this such a problem? The beauty of the idea is that property can’t be moved unlike cash. The unfairness lies in the tax avoidance by the wealthy whilst the poor have to pay up.
    But why aren’t we worrying about the 2+million unemployed with threats of benefit cuts along with disabled people because that is areal problem not encountered by tthe 2+million houseowner and it isn’t fair.

  • @Dominic, even in Kensington and Chelsea, the most expensive borough of London, average house prices are £500,000 below the level that mansion tax would start to hit. Saying that mansion tax hits “ordinary family homes in London” suggests you’re either scaremongering or completely out of touch.

    @Jedibeeftrix, I for one hope that mansion tax is the first step on the long journey of switching towards land tax and away from income tax, so I can offer you no such guarantees. One of the issues we’re going to have to face up to in the coming years is that an aging population will mean fewer workers whose taxes currently support care for the elderly. A income->land tax switch would put our tax system on much surer footing (as well as being better for the economy and better at tackling inequality).

  • Alex Matthews 30th Oct '12 - 12:22pm

    Even in London, this tax only affects a tiny minority and there are safeguards in place to ensure that those people who claim to have a house worth over 2 million, but still have no money to pay this tax, can continue to live in their home.

    Besides, I am sorry, but we live in difficult times and many at the bottom were displaced because they simply could not afford to remain where they were, so it is only fair and liberal that those at the top also share the burden.

    Also, as food for thought, many of the people this affects are actually very very rich, foreign investors who would otherwise pay no tax to the British government at all; not families residing here.

  • david thorpe 30th Oct '12 - 12:25pm

    @ andrew suffied-they can afford to live in the “million pund hosue-why should they sell it

    on the pit about offshore-the deeds will be in the names of an offshore turst-registered address will be a PO box in the cayman islands-the guy who lives in the house will be the ‘caretaker’ not the owner-HMRC can chase around carribean isalnds trying to find who the beneficial owners of the trust are if they want-but it will cost more than that years bill-and if they find the person and get that years tax?
    tyhe offshore trust willr elocate to another taxhaven under qnother name and the game starts again-its unfair because the poorest people in the 2million houses will have to pay the richest wont-and the amojt collecetd will be twopeence ha’peeny

  • david thorpe 30th Oct '12 - 12:27pm

    @ alex-they still wont pay it-and the poorest have no safegaurds beyondf those outliend in my piece-which are safegaurds which will not raise any money-this tax would be the biggets flop in hiosotry of taxation-its impossible to collect this tax because its impossible to know who tyhe owners are-a blind trust in the cayman islands uis used by drug caretsl to hide moeny HMRC rasent going to get to the bottom of it when much tougher agaencies have tried

  • david thorpe 30th Oct '12 - 12:35pm

    @ stephen johsnon-the new CEO of aSTRA ZENICA WILL PAY INCOME TAXC-NI AND CAPITAL GAINS TAX IF HE HITS THE TARGETS NECESSARY TO GET THAT amount of money-and if he hits the targets-which are profit related various governments will get mroe in corproaion tax-SO i PERSONALLY HOPE HE RECIEVS THE FULL PACKAGE AND we recieve the full taxation

  • Alex Matthews 30th Oct '12 - 12:54pm

    they still wont pay it

    ——————-

    Well that one line rebuts me…wait what? How is this is a substantive argument?

    David as for trusts, well yes they are problematic for most tax’s, but that is the beauty of this, whenever a home is sold, it must be registered with the land registry, whoever/whatever name is on there pays. Problem solved. Even in a blind trust the house be registered to someone, normally the executor/trustee, otherwise it is not apart of anyone’s estate and therefore not apart of the trust.

    In my experience, the only people against this tax are those who fear any sort of wealth based tax.

  • david thorpe 30th Oct '12 - 12:57pm

    @ mark-its not a matter of refusal-its a matter of tracking down who to ask for the money-am I right in thinking that the tax amount comes comes 10k at the lowest end? the government would be humiliated in law if it tried to seize a 2million asset for a 10k debt-what happens the other 1.999million?
    because the same trust wont get caught twice-they will change te name and start again the next year.
    Buy to let owners drive upr ents because they drive first time buyers out of the makrets, which mneans they have to rent-which increases demand for rental properties from people who would otherwsise buy-if there were less buy to let properties then more people currently renting could buy there own home-which would mean they would not be in the rental market which would drive rental prices down-but crucially it wouldnt affect supply-the houses will still be built-but built and sold to first time buyers rather than but to let landlords-so supply remains constabnt-supply falls-thus-rents fall

  • Alex Matthews 30th Oct '12 - 1:12pm

    David: Simple, they sell the property and allow those who refused to pay to reclaim whatever is left, (and a nice little jail sentence for fraud of registering their property correctly in order to evade tax. Yes that would be evasion, not avoidance.)

    I know my answer lacks a sense of seriousness, but seriously, I doubt that the public will be too sympathetic towards those who try to avoid/evade tax.

  • Alex Matthews 30th Oct '12 - 1:15pm

    David: Simple, they sell the property, take out the £10,000 and then allow those who refused to pay the tax to reclaim whatever is left and a nice little jail sentence for the fraudulent act of not registering their property correctly in order to evade tax. Yes that would be evasion, not avoidance.

    I know my answer lacks a sense of seriousness, but seriously, I doubt that the public will be too sympathetic towards those who try to avoid/evade tax.

    (Sorry, clicked send by mistake the first time.)

  • Matthew Huntbach 30th Oct '12 - 1:38pm

    Dominic

    Matthew – as David has pointed out in his piece, this would have no impact on “driving down house prices”. It would however hit a number of large Bengali families + a number of people with large mortgages and small net wealth in both cases living in ordinary family homes in London that don’t look anything like “mansions”.

    I find the argument that it would do nothing to drive down house prices to be very weak. It seems to me that if it is made more costly to hold onto housing as an investment people are less likely to do so and therefore there will be less demand and prices will fall, or at least not rise so fast. Yes, some people years ago bought what was then considered slum property in the East End, and it now can be sold for large amounts, but I don’t see any particular reason why the fact that some of these people are Bengalis should make a difference to the argument. I live in a three-bedroom house just a few miles away from the East End, and it would sell for about a quarter of a million, so sorry, I just don’t accept the argument that two-million is just a normal London family house. It’s normal for just a few boroughs, either very central locations or particularly posh places. Those who can’t afford or who are unwilling to pay the tax should move somewhere just as spacious but maybe not so fashionable, like where I live.

    There are better ways to tax property (LVT, extra council tax bands, frankly pretty much anything is better than MT) so why have we got the worst version foisted upon us?

    Oh sure, I’m really more concerned with the general principle of property tax rather than the particular form it might take. To me it is very much a matter of fairness – why should someone who makes money by work be taxed on it, whereas someone who makes money by owning housing should get it tax free? We will always get “little old lady in a big house” sob stories thrown at us, but I do think that can largely be covered by a state guaranteed equity share payment system, which I would accept as a replacement for inheritance tax. I also think any sort of property tax should have a needs-based allowance, just as we have tax allowances with income tax. That would get round the “we have a big house because we have a big family” line.

  • david thorpe 30th Oct '12 - 1:40pm

    @ alex-thats simplistic not simple-the peason registered their property as they are entitled to-its not a crime-that law would be challenegd in the first week andf Im not sure the government would win-and it may cost mroe than the amoutn to be raised-thirdly jail is out of the question-the owners would be lviing overseas and there is no extradidtion from anywhere in the world for tax offences-you dont understand-the owner is a company-and a company can be sued in law-there is no idnividual to jail-thats the end of it-you are obsessing that somewhere is an individual-well no-companeis are legal entities that can sue and be sued in their own right-no idnividual need ever appea.
    Tod ow aht you rpopsoe-in law the governmebntr egister a judgement against he comapny registered overseas for the ammount of the tax-the companies decalres voluntary liquidation-the debt dies as it was against the old company not the new one-hmrc can chase the new one butthey would lose-thats the world how it is-not how we wish it to be-if livb dem polciyw as made on those lines we wouldnt be in the patheritc satte we are

  • david thorpe 30th Oct '12 - 1:44pm

    @ mark-many of the peioroties are not owned by people but by comaopneuis which cant be jailed-those apying council tax alreday are not the oligrachs etc-and thus the leastw erlathy of the people in thsi band and therefore the ones who will have to pay-a point Ivemade alreday

    I would love to see research which shows that reducing the number of suppleirs in the rental market drives down prices-it would make every law of economcis reducndant

  • david thorpe 30th Oct '12 - 1:59pm

    only nine of the eighty apartments in the one hyde park development are registered for council tax-westminster bortough is losinga fortune and there is nothing that can be don-why would somehting mysteriously be able to be done when its the mansion tax rather than council tax?

  • david thorpe 30th Oct '12 - 2:02pm

    @ alex-what happens in london is the home is never sold-the company which owns the home is sold-so the home ownership never changes-it really is that simple-Imd ealing with the realities of what happens on the ground

  • david thorpe 30th Oct '12 - 2:06pm

    I would argue mark-that it has increased the number of properties which have tenats in them instead of owenr occupiers because the owner occupiers who are first time buyers are driven out of the market by B2L-tghis means they have to rent-increasing the demand for rental prprioeprties causing bioth rents and hosue prices for first time buyers to rise-neither ofw hich is good for the economoy.
    house prices go up because supply for first time buyers is restricted-forcing them to rent-which pushes rents up-rents are rising fatser than incomes in london for this reason

  • david thorpe 30th Oct '12 - 2:21pm

    mark-new build properties in an area reduce rents-iwhetehr they are B2L or not-but in an area with no new builds-where exisitng housing stock is convereted from owner occupier to b2l-house prioces will go up as supply falls relative to demand-and rents will go up because more poepl cant afford to buy a disincentive to invest in B2L would drive down hosue rpicves-which means that people who arwe renting will now be able to buy-reducingt he demand for rental

  • david thorpe 30th Oct '12 - 2:47pm

    @ mark-of course theye in it already-but they remain in it longer than would otherwise be the case-while enw people are added to it-thats why despite londion being increasingly B2L rents are rising ata rate faster than incomes and hosue prices-and yesa I know B2L happens in areas where there are no new builds-its those areas that are the problem-rather than it happening in enw builds where of copusre resnst go down as supply has gone up

  • Alex Matthews 30th Oct '12 - 5:01pm

    The semantics of English aside, I am intrigued as to why are you refuting an idea, which was by the authors own admission was not wholly serious.

    However, I will humour you.

    “-the peason registered their property as they are entitled to-its not a crime-“

    I can only guess at your meaning here, but I am assuming that you are saying it is legal to register a property and still have it in a blind trust. In which case, there is no argument against you to my limited knowledge, well other than the fact that I never contradicted this. My point is that if the person has not registered the property correctly for the purposes of evading tax, that is illegal, and unless you can present me with a case where they can actually register the land in such a manner as to ‘legally’ leave it without a named legal person, in my mind any form of registration conducted in such a manner would be quite quickly deemed illegal for a host reasons going way far beyond just tax evasion. This is because you have to register any property with a named person when you sell it, otherwise it is not registered. (It is also worth noting that a company and other such organisations are for the purposes of the Law deemed to be legal persons, and thus liable for tax.)

    =So in short, yes they can register it in many ways, but no, sorry, they will need to name someone when they do so and that person can easily be liable for the tax on the property because in law he/she has presented themselves as the legal owner of the property.

    “Im not sure the government would win-and it may cost mroe than the amoutn to be raised-“

    I am sure it would cost more money in some cases for that individual claim, but note that no tax should not be taken on a case by case basis for the purposes of gauging its net value. You should be looking at value of the tax as a whole.

    “thirdly jail is out of the question-the owners would be lviing overseas and there is no extradidtion from anywhere in the world for tax offences”

    This bit was the part which was clearly not serious, however yes you are correct, extradition is a problematic legal issue for a host of reasons. However, it is not something which is impossible to overcome. Parliament can make it that once the property has been sold and the tax claimed, then any person/persons wishing to make a claim for the remaining assets must be seen to be bona fide. (A common practise in most areas of the Law anyway.) IE They must come here and stand trail to prove in a court of law that they did purposefully act to in such a manner so as evade tax. If they do this and win, then the government still gets its money, and is shown to have acted fairly because the person should have paid their tax in the first place and it is not the governments fault they were incompetent. If they do this and fail, we can jail them for their crimes. If they fail to stand trial, then they will be seen to have forfeited the remaining money to the government. This is a win-win-win situation for the government, and as I said, I seriously doubt the public are going to sympathise with those wishing to evade tax.

    “understand-the owner is a company-and a company can be sued in law-there is no idnividual to jail-thats the end of it”

    Actually the director/directors of the company are responsible for registering the company’s property and if they did this incorrectly in order to evade tax they would be deemed to have acted without bona fide (in bad faith) and be liable for fraud. Thus they would be the person/persons who could be taken to jail, if we are looking for someone to jail that is. Personally, in relation to companies, I feel there are more effective measures at the governments disposal to make them pay.

    “@ alex-what happens in london is the home is never sold-the company which owns the home is sold-so the home ownership never changes-it really is that simple-Imd ealing with the realities of what happens on the ground”

    80% of all ‘land’ is now registered and the number is growing because that stat is now a few years old. Of the unregistered land, around 16% of it is undeveloped and therefore out of the scope of this tax. The means we have 4% of properties of roughly which need registering, and I would interested to know how few of these are worth 2 million and have no traceable owner. In short, the stats show that if this is a problem is it a tiny one which offers no actual rebuttal of this tax. Just that yes, they maybe there might just be a few cases where there is an undying legal person who owns a property worth more than 2 million and is completely untraceable for the purposes for this tax is slightly possible.

    (Though to make a company untraceable for the purposes of evading this tax would be impressive considering that they would have had to been planning this from before 1921. I mean to have the foresight that registration could be used against the owner of the property almost 100 years later for the purposes of collecting a mansion tax, now that is impressive. >>)

    In regards to any points you may have made besides those commented upon, I am sorry to say that I simply cannot understand what you have written. I am assuming that your computer or keyboard is having problems, however as I said I cannot understand what you have written and so can only apologise for my lack of response to anything further you may have said.

  • This thread has become very convoluted but in answer to Matthew H (some way above) my reference to Bengali families was because where I live there are large families (10+ adults) living in large houses – and no doubt not exactly high earners either. Another iniquity of MT is that 10 people on housing benefit living in a large house (as it would need to be) would be in a position where they’d have to pay MT, whereas a single person ‘blocking’ a slightly smaller £1.9m house would pay nothing. They needn’t be Bengali, of course – but I was thinking about people who tend to live together in larger groups.

    And Duncan: I don’t know where you live but where I am there are plenty of >£2m houses that are not occupied by wealthy people – either as in the example above or because they have nearly as huge mortgages, so their net wealth is a tiny fraction.

    If you favour a switch to greater taxation on land versus income, then don’t support this wretched Mansion Tax policy, which will only serve to discredit that noble aim. Instead why not focus either on something that works & actually raises net tax revenues (eg extra council tax bands) and/or delivers greater fairness and better economic outcomes (eg Land Value Tax)

  • ok, I mispoke, not housing benefit perhaps but we do have plenty of large families in central London living in large houses but where there are few income earners and all of those are low incomes. It’s a symptom of property price inflation + large extended families that tend to live together (particularly prevalent in certain communities)

  • Dominic, you cant get a huge mortgage without either having a large income, or pretending you have a large income. If someone falsifies their income to take on a huge mortgage then additional taxes are self imposed.

  • Dominic, I live in Oxford. You must live in prime central London if you’re surrounded by >£2m houses. 99.5% of houses in the UK are worth less than £2m. And remember, it is only a mansion’s value above £2m that would get taxed.

    If someone has been able to take out a mortgage to buy a £2m house, they must be on an almighty income.

    Yes, I want to move towards Land Value Tax, but all the arguments that are being deployed against mansion tax would be used with a far greater extent against LVT too. Far from being discredited, every opinion poll has suggested Mansion Tax is highly popular.

Post a Comment

Lib Dem Voice welcomes comments from everyone but we ask you to be polite, to be on topic and to be who you say you are. You can read our comments policy in full here. Please respect it and all readers of the site.

If you are a member of the party, you can have the Lib Dem Logo appear next to your comments to show this. You must be registered for our forum and can then login on this public site with the same username and password.

Your email is never published. Required fields are marked *

*
*
Please complete the name of this site, Liberal Democrat ...?




Recent Comments

  • User AvatarMike Ward 2nd Sep - 10:05am
    " These feelings can be particularly acute in London, especially around Heathrow, where residents endure noise and dread the prospect of more flights." Not just...
  • User AvatarDavid Bertram 2nd Sep - 10:04am
    Expected, but still very sad, news. We have lost a thinker, a humourist, a connoisseur of life's finer things and an all round nice bloke....
  • User AvatarTony Rowan-Wicks 2nd Sep - 10:04am
    Perhaps the awaited email was too complex for the team to handle. Actually, I thought the piece above was about the maximum we could expect...
  • User AvatarLinda Jack 2nd Sep - 10:01am
    Thanks Caron - whenever things like this happen and I throw up my hands in despair - your piece and most of the subsequent comments...
  • User Avatarjedibeeftrix 2nd Sep - 9:33am
    Can we do the same for defence?
  • User AvatarMark 2nd Sep - 9:11am
    Welcome back!