Mike Vickers' Blog

August 30, 2012

Property Taxation – Transactional or Annual?

Filed under: DHI SPIF, Politics, Scotland — derryvickers @ 10:10 am

SPIF – Property Taxation – Scottish Government LBTT Proposals
Panel Meeting 28 August 2012 – RSE

I attended an interesting panel discussion with Prof Jim Gallagher in the chair.

The purpose of the Panel discussion was to review the proposed legislation on replacement of Stamp Duty by a Land and Building Transaction Tax (LBTT) following the introduction of the Scotland Bill of 2012 and to set this in the wider context of property and land usage and its taxation in Scotland over the coming years.

Panel members were

  • Susie Simpson – Tax Director PWC
  • Prof Gwilym Pryce – University of Glasgow
  • Andy Wightman – writer on land policy
  • Eugene Creighton  Income and Capital Taxes – Irish Government

Susie Simpson concentrated on the Scottish Government proposals for a LBTT and the difference in tax take from the existing Stamp Duty taxation.  The UK Government will reduce the income tax paid to the Scottish Government by 10p in the Pound from 2014 which the Scottish Government will be able to make up directly how it wishes.  Susie showed graphs comparing the proposed LBTT with Stamp Duty for residential and for commercial transfer tax.  For residential properties there is an increase of up to ~30% while for commercial properties the proposed difference is much less between 3% and 9%.

Thereafter the presentations were more of a free for all of personal views!

Gwilym Price considered that these ‘fragile’ times any change was to be resisted.  Later on questioning by Andy Wightman on when would be a good time Gwilym admitted he did not know.  One of Gwilym’s real concerns was that there are always unexpected consequences and changes need to be incremental so that these become clear and can be reversed before the consequences get out of hand.

Andy Wightman considered that land prices are too high in the UK and Scotland in particular.  He instanced Bovis who in their comments on their house building said they made all their money from land speculation – house building was just a necessary consideration of doing business.   In his opinion far too much money is tied up in land in this Country – it is not delivering any benefit to the community and is one reason for the Country’s sad financial position.  Home ownership is now not possible for young couples who have to rent on Short Assured leases giving them no surety of tenure.  Land is in effect a frozen asset.   LBTT if it is to be levied at all, it should be the same for all.

That only left Eugene Creighton to tell us that the Irish have tried property, land and no tax and none has been satisfactory – Policy made on the hoof with expert advice ignored!

And real interest came with the discussion thereafter.   Transaction tax with Stamp Duty or the proposed Land and Property Tax decrease mobility, keeps unproductive land unproductive.  Unproductive land keeps other land costs high and unaffordable for the young in particular.  Not surprisingly there was a general feeling that an annual land tax would encourage land circulation, reducing its value and still provide the tax revenue that the Scottish Government is seeking.  But of course this is what politics should be about .

BTW I spoke with a chap afterwards who stated that 90% of the Scottish population lives with 10 miles of the coast – not sure who you define the Clyde!

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