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Taxing capital gains on properties is fraught with difficulty, particularly when properties are owned by offshore entities, and even the Land Registry do not kn

by UVB-76 10y ago

Taxing capital gains on properties is fraught with difficulty, particularly when properties are owned by offshore entities, and even the Land Registry do not know the identity of beneficial owners. Taxes on property transfers (capital gains, stamp duty, etc.) also create hysteresis in the market, which should be discouraged. It's much easier to implement a council tax style system, with non-payment a criminal offence, and the ultimate (if extreme) threat of property confiscation quite practical to go through with.

notahacker 10y ago
Agree with your points, but if capital gains taxes were phased in and ratcheted upwards, and the tax is deductible if people are using their gains to purchase a similar value UK property, I don't see hysterisis being a major problem. I'd actually be more worried about avoiding inducing a selling frenzy and crashing prices in the short term. Offshore registered properties without named beneficial owners are only a problem if you allow UK freeholds to be held by shady foreign entities and don't have an especially punitive tax regime just for them. Council tax style systems suffer from property owners (particularly private householders) often not having disposable cashflow remotely comparable to the value of a house they might have acquired many years ago, especially pensioners and especially in London. (whilst I'm sure in practice, private sector equity share schemes wouldn't be too unhappy to lend the house-rich the cash, I can't see council taxes as aggressive as hypothtetical capital gains taxes being politically possible)
- UVB-76 10y ago
  Agreed on the cash flow point, although I don't have much sympathy for people who have come into ownership of expensive properties through inheritance, or obscene capital appreciation over the course of several decades. As you mention, many people will be able to borrow against the value of the property to pay the taxes. Unfortunately it is indeed a political problem. What the UK really needs is an enormous, publicly-funded house building programme, but that would of course harm existing homeowners.

by UVB-76 10y ago

notahacker 10y ago

Agree with your points, but if capital gains taxes were phased in and ratcheted upwards, and the tax is deductible if people are using their gains to purchase a similar value UK property, I don't see hysterisis being a major problem. I'd actually be more worried about avoiding inducing a selling frenzy and crashing prices in the short term. Offshore registered properties without named beneficial owners are only a problem if you allow UK freeholds to be held by shady foreign entities and don't have an especially punitive tax regime just for them. Council tax style systems suffer from property owners (particularly private householders) often not having disposable cashflow remotely comparable to the value of a house they might have acquired many years ago, especially pensioners and especially in London. (whilst I'm sure in practice, private sector equity share schemes wouldn't be too unhappy to lend the house-rich the cash, I can't see council taxes as aggressive as hypothtetical capital gains taxes being politically possible)

UVB-76 10y ago
Agreed on the cash flow point, although I don't have much sympathy for people who have come into ownership of expensive properties through inheritance, or obscene capital appreciation over the course of several decades. As you mention, many people will be able to borrow against the value of the property to pay the taxes. Unfortunately it is indeed a political problem. What the UK really needs is an enormous, publicly-funded house building programme, but that would of course harm existing homeowners.