The Labour Party this week announced plans for a mansion tax in the UK which would see an additional tax on properties worth in excess of £2 million. This is not the first time that the Labour Party has proposed such a tax and while it is headline grabbing, and plays to the core Labour party support, is it really viable?
There are a number of issues to look at with regards to the proposed mansion tax which include rising property values, cost of collecting the tax and revaluing properties in the UK on a regular basis.
Rising property prices
When you bear in mind that the average house price across the whole of the UK currently stands at £177,824, with London prices averaging £467,070, it is not difficult to see the massive divergence in property prices across the country. As a consequence many commentators believe this is nothing more than a tax on the “rich” despite the fact that successive UK governments have fed the UK property price boom, with reduced new house building numbers and ever tighter property regulations.
Quote from PropertyForum.com: “Would an increase in UK base rates decimate the UK property market?”
There is however a growing number of properties valued in excess of £2 million which would come under the criteria for the Labour Party’s proposed mansion tax. When you bear in mind these properties already attract an array of taxes and in many instances the owners pay higher income tax than the average worker in the UK, is it really fair to use them as a cash cow for depleted government finances?
Cost of collecting mansion tax
Is has been mentioned time and time again that the cost of collecting the so-called “mansion tax” could indeed lead to a net increase to the UK government coffers of exactly zero. This will surprise many people but when you bear in mind the limited pool of properties valued at £2 million or more, the cost of setting up the system and actually collecting taxes, you do begin to get a better angle on the situation.
It is also worth noting that the Labour Party has been fairly vague about the level of proposed taxation for its so-called “mansion tax” while bathing in the attention grabbing headlines this has caused across the popular press. Perhaps if we had more detail from the Labour Party with regards to the creation and running of this particular system we could make a more balanced assessment?
Perhaps one of the glaring omissions from the Labour Party’s proposed mansion tax is how the authorities would efficiently value properties on an ongoing basis to see whether they come under the scope of the mansion tax. Again, this is a cost which would be offset against the actual tax received therefore making it a little more difficult for the authorities to create a net income when all costs and charges are taken into consideration.
Time and time again the Labour Party have used the so-called “mansion tax” as a headline grabbing initiative which often deflects from other issues which are perhaps not as positive. If the Labour Party was to reveal exactly how the system will be funded, how it would run and the estimated net income then we could make a more balanced assessment of the situation. However, until more data is available it is difficult to see any real future for this proposed new income stream which would help offset government budgetary pressures.