Thursday, 14 June 2012
Is 'Progressive' Fairer?
The Scottish Parliament will have new financial powers, from 2015, over taxes on land and property transactions and on disposal to landfill. The new powers come courtesy of the Scotland Act 2012.
This week John Swinney unveiled his plans to scrap Stamp Duty land tax to the Parliament and announced a consultation on the Land and Buildings Transaction Tax, which will replace Stamp Duty.
Initially, when I read about this new tax being 'progressive', I immediately assumed it would be a licence to force more money out of people's pockets, but I hope to be proved wrong. (Green energy taxes were described as progressive when they were first mooted).
John Swinney's description of the new tax may appear to be fairer than the current system, although there is little detail. He proposes to decrease tax on properties under £325,000 (or thereabouts) and suggests that would bring benefits to around 95% of the property market. Those looking to buy a home worth £180,000 or less would be exempt from paying tax altogether - a move to encourage first-time buyers.
However these proposals will not make house purchasing less expensive. Anyone purchasing a property in Scotland has to provide a Home Report which can cost several hundred pounds. Since the introduction of these reports I have yet to meet anyone who has purchased a house solely using the content and they have -sensibly - also acquired their own independent survey; thereby pushing purchase costs higher.
The new tax may well curb the regular increase in house prices, although some may think that's a good thing, but that is not necessarily so. If fewer people buy pricier properties, because the tax will be higher than elsewhere in the UK, then they may well fall into disrepair.
In general Scotland's house prices have always been lower than many south of the border and in recent years, that has attracted those who have sold property in these areas to buy here. The new tax will make no difference to situations where locals are unable to afford to buy because bidding wars push properties outwith their budgets.
Another consideration should be given to the exemption on properties under £180,000. Will this encourage more developers (purchasing on a buy-to-let basis) rather than first-time buyers?
I do hope a revision of the banding system is included in the consultation, but that was not mentioned in John Swinney's statement.
The devil will be in the detail no doubt, but until we get rid of the mandatory Home Report - which England did some time ago - house buying in Scotland will continue to be more expensive than the English system.