A surprising view on tax from a Tory MP

On MailOnline Tory MP and ally of George Osborne, Nadhim Zawahi says that his house is worth £5 million and that he would like to pay more tax on it:

Already, thanks to the closure of tax loopholes, the richest in this country will be paying a greater share of tax in every year of this Parliament than in any year of the last Labour Government.

However, there’s one area of our tax system that isn’t adhering to that principle: council tax. The highest council tax band in England is Band H – which includes any property that in 1991 would have been worth more than £320,000. Today, such a property in London would be worth at least £1.2million and in the West Midlands around £880,000. As a result, someone who has worked hard and saved their whole life to buy an admittedly very comfortable Band H home in Stratford-upon-Avon pays £3,000 a year in council tax.

Yet the billionaire oligarch in his £25 million Band H pad in Chelsea pays just £2,150 a year – thanks to Kensington and Chelsea’s low council-tax rates. Resolving this isn’t the politics of envy as some claim, it’s about ensuring there is simple fairness in our existing tax system.

The majority of Conservative members even agree – in a survey by the Conservative Home website almost 60 per cent say they support the introduction of higher council-tax bands. I speak as the owner of a £5 million home.

Fixing this anomaly needn’t be expensive or involve revaluing every single home in Britain. After all, the last thing the Government wants is to increase bills for hard-working families and undo the good work of the council tax freeze.

A much simpler approach would be to simply use the 1991 values of the 132,000 English homes in Band H and reallocate them to a vamped-up Band H or one of two new bands, I or J.

You can read the full article here.

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  • You’d need more than two more additional bands – surely!

  • Yellow Bill 26th Nov '12 - 6:37pm

    Surely the Lib Dem position is that council tax is obscelete and should be replaced with a local income tax and a MANSION TAX?

  • David Allen 26th Nov '12 - 6:47pm

    Zawahi is arguing that this option would be better than a mansion tax, probably because it would be gentler. He deserves some credit for recognising the need to increase taxes on wealth, but we don’t have to agree with his proposals as to how to go about it.

  • Old Codger Chris 26th Nov '12 - 10:37pm

    Isn’t Land Value Tax a better solution than a mansion tax or extra bands of Council Tax?

  • The current council tax system based on the nominal value of domestic property is unfair as it not based on earnings and is particularly harsh for pensioners and the unemployed and those in part time work.
    Why Land taxes are also unfair is small farmers and smallholders with property valuation of more £300,000 with small incomes, this is true in the case of dairy , sheep and hill farmers.
    We as Liberal democrats should stand by the policies to replace council tax by local income tax with, perhaps, a local corporation tax. It is only fair that if you earn more in salary or profit then you contribute more to the local community.
    Property or land values in no way reflect the ability to pay.
    If everybody has to decide that property must have income to pay land and property taxes then dairy farming will vanish and we will be importing our dairy and food products.
    As for the oligarchs and overseas billionaires – they should pay income tax if they live or have a property in this country, both local and federal.

  • Old Codger Chris 27th Nov '12 - 12:25pm

    Ernest – I’m far from being an expert but wouldn’t a sensible Land Value Tax be levied on the development value of land, which would be nil on land designated for farming etc. I’m thinking of “encouraging” developers to build homes on their land banks sooner rather than later.

    Nothing wrong in a modest Local Income Tax in addition.

  • Matthew Huntbach 27th Nov '12 - 1:19pm

    Yellow Bill

    Surely the Lib Dem position is that council tax is obscelete and should be replaced with a local income tax and a MANSION TAX?

    No. Actually, I think “Mansion Tax” has just been floated as a way of trying to initiate a discussion on property taxation, and as a compromise position because it is accepted the case for any wider property taxation is hard to sell. Those who lose out in property taxation are those most likely to vote and most likely to have access to the media, or in fact the media commentariat is a subset of these people. Those who gain from property taxation are those least likely to vote, those who lack the economic reasoning abilities to see how they would gain, and those whose lifestyles are very far from the lifestyles of people who get access to the media.

    I think the Liberal Democrat push on local income tax in the past was a grave mistake, because it went against the long-standing Liberal support for Land Value Taxation. The arguments used for local income tax were of the sort which are used against ANY form of land or property taxation, LVT included. By being part of this “only money earned through work should be taxed” way of thinking when we pushed local income tax, we painted ourselves into a corner which makes it harder to put the case for a decent property tax along the LVT lines. For all its faults, council tax is at the moment the only thing we have which is a sort of property tax, we should have acknowledge that rather than called for it to be abolished and replaced by yet more tax on jobs.

  • There is a good article in the conference edition of Liberator (page 28) by Tony Vickers, Time for Lo-Tax where he spells out the main elements of an outline plan for the introduction of land Value Tax:

    – Basing LVT on rental value not capital value, because property/land rents are much more stable than prices.
    – Using LVT not just for local government but mainly for national taxation.
    – Establishing that all land is eventually taxable, so a coherent and complete register of ownership and value can be undertaken.
    – Exemption for low-value land and small sites, also a tax-free element for owner-occupiers, linked to local land values, to encourage spread of ownership.
    – Make the ‘tax shift’ revenue neutral by law, thereby requiring offsetting reductions in others taxes for every budgeted increase in LVT.
    – Use of ‘precepting’ (as happens now with multi-tier local government) to enable the simplicity of a single national tax administration to be combined with full autonomy for every elected council (and devolved governments) in rate setting: local billing authorities would be abolished.
    – Treating owner-occupiers as having notional rent paid to themselves (what they would earn if their home/business-site was rented), so that LVT can be subsumed within the income and corporation tax systems.
    – Allowing LVT liability of owner-occupier pensioners and other claimants to be ‘rolled up’ and only paid (with interest) upon death, sale or re-mortgage of property.

  • Old Codger Chris 27th Nov '12 - 5:42pm

    Oh dear, the details outlined by Joe Bourke look horribly complicated and costly. I’m beginning to go off the idea.

  • Tony Vickers puts forward some excellent ideas. His ideas seem straightforward compared with the current system of income tax. I understand that Tony is suggesting reducing income tax by introducing land taxes which would be very popular. The Mansion Tax was popular with voters.
    Giving a homestead exemption for those with property assets below the average (mean) for the population was suggest ed by Tony at the Harrogate conference. This would solve the issue of hill farmers who would be exempt.
    Ed Joyce

  • “Band H home in Stratford-upon-Avon pays £3,000 a year in council tax. … Band H pad in Chelsea pays just £2,150 a year”
    One of the many distortions contained in the current local government funding system.

    To me it would seem that firstly we need to address these distortions. Secondly and probably much more importantly, we need to address the collections problem (I remember reading that there is a significant level of non-payment of Council tax particularly among the non-UK owners of high value property). Thirdly, we can introduce new council tax bands to handle the billionaire’s pad; knowing that the vast majority of UK tax payers will support it and most importantly the monies will be collected…

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