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Adding Vat To House Purchases.

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Given the government won't / can't tackle the cause of the recent house price mania, easy and cheap money, what are your views on charging full VAT on house purchases?

Some of the benefits I can see are: -

1) Make people think seriously about purchasing a house, returning it to being a home rather than an investment.

2) Seriously dent BTL as a speculative option.

3) Cause a correction in house prices from their current levels - good for HPCers.

4) Raise revenue for the government to pay down the deficit. People will always need to buy houses, so the tax will be collected.

5) Destroys existing capital gains from house price rises - keeps HPCers sweet.

It looks like a win-win situation for HPCers.

Do you see any other benefits or disadvantages?

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1) agreed

2) agreed

3) would just mean that anyone buying would pay 17.5% more. Instant hp inflation.

4) agreed

5 )leaves capital gains unaffected; sellers still get 100% of their gain, buyers end up paying the difference

so, on balance, not one I'd support.

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1) agreed

2) agreed

3) would just mean that anyone buying would pay 17.5% more. Instant hp inflation.

4) agreed

5 )leaves capital gains unaffected; sellers still get 100% of their gain, buyers end up paying the difference

so, on balance, not one I'd support.

Would it mean that you'd get instant HP inlation? If you purchase a new car, it's value goes down the minute you drive it from the forecourt. I don't know about you, but if I am going to be charged VAT on a house purchase I'm going to make sure I drive the seller into the ground on price.

I think existing capital gains would evaporate rather quickly in this scenario. There'd be little to tax.

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That assumes that sellers would drop their prices

Evidence so far seems to be that they don't, and that if buyers won't stump up then the sales volumes just collapse.

You'd need a hpc of 17.5 % just for it to look neutral to a buyer; add in any real fall and you'd be looking at wet-dream hpc figures.

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That assumes that sellers would drop their prices

Evidence so far seems to be that they don't, and that if buyers won't stump up then the sales volumes just collapse.

You'd need a hpc of 17.5 % just for it to look neutral to a buyer; add in any real fall and you'd be looking at wet-dream hpc figures.

I thought you agreed that people always need to buy houses. People also need to sell. If they need to sell, they need to drop the price to attract buyers. People aren't going to bid the prices up when that means an increase in the tax they'll have to pay.

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I'd rather see CGT on all house profits myself. But the time to have done that might have been when they were a lot lower - like in the mid 90s - to lock them into that pricing regime.

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I thought you agreed that people always need to buy houses. People also need to sell. If they need to sell, they need to drop the price to attract buyers.

You'd think so. Doesn't seem to have happened.

People aren't going to bid the prices up when that means an increase in the tax they'll have to pay.

It'd just become the new paradigm.

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I'd rather see CGT on all house profits myself. But the time to have done that might have been when they were a lot lower - like in the mid 90s - to lock them into that pricing regime.

I'll assume you don't already own a home. Say you purchase a house and some time in the future need to move up - perhaps to accomodate a growing family. Will you be happy forking out extra money for a more expensive house plus pay tax on any price rise of your current house? I think most on this site can see that prices only increased because of easy money. That's just inflation. You want to tax inflation when inflation is already a tax?

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I'll assume you don't already own a home.

Be careful what you assume ;)

Say you purchase a house and some time in the future need to move up - perhaps to accomodate a growing family. Will you be happy forking out extra money for a more expensive house plus pay tax on any price rise of your current house?

The point is that with CGT on the increase, I don't have to pay as much for the next one up because the CGT has suppressed the speculative bubble. In the ideal world, the increase is close to RPI.

I think most on this site can see that prices only increased because of easy money. That's just inflation.

It's a special case of inflation though, isn't it ? It was inflation in one asset class due as you say to easy credit but also to the availability of that asset for speculative gain.

I wasn't suggesting not controlling the easy credit as well.

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What about VAT on second home/BTL purchases only?

Possibility, but hard to police I'd guess. Also, that leaves the much bigger first home market still functioning as normal.

I suspect taxing purchases now would more than compensate FTBers with the price falls it would initiate.

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Possibility, but hard to police I'd guess. Also, that leaves the much bigger first home market still functioning as normal.

I suspect taxing purchases now would more than compensate FTBers with the price falls it would initiate.

If your buying a second home don't you have to declare it on the mortgage? Same with BTL don't you have to declare that to the mortgage lender?

I admit that people will try to get round it but if you have say a 5 year minimum sentence for fraud and you lose the assets bought I think it would be a big incentive to play fair.

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No offense to the OP, but this is the stupidest idea I ever heard.

I can't believe people her actually want to pay MORE taxes.

The root cause of the HPI is our debt based monetary system.

As long as the government has to find new ways to put people and themselves into debt in order to create money for the economy, HPI, bubbles and busts will exist. No taxes will change that ever, they will just make the common people poorer, while the rich will always find ways to avoid them.

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Be careful what you assume ;)

The point is that with CGT on the increase, I don't have to pay as much for the next one up because the CGT has suppressed the speculative bubble. In the ideal world, the increase is close to RPI.

It's a special case of inflation though, isn't it ? It was inflation in one asset class due as you say to easy credit but also to the availability of that asset for speculative gain.

I wasn't suggesting not controlling the easy credit as well.

Don't you think that taxing the gain is unfair on people who only have one home and want to move? If government allows easy credit, they are the only one's who gain from introducing a CGT on the someone's home. You could have bought a house 20 years ago. Since then prices went crazy because of easy credit. Why would you happy to be penalised for that? If the gain, because of infaltion, is big enough that tax bill may be so large as to negate the possibility of them being able to move.

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If your buying a second home don't you have to declare it on the mortgage? Same with BTL don't you have to declare that to the mortgage lender?

I admit that people will try to get round it but if you have say a 5 year minimum sentence for fraud and you lose the assets bought I think it would be a big incentive to play fair.

Introduce it on all purchases, there's nothing to get around.

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I'll assume you don't already own a home. Say you purchase a house and some time in the future need to move up - perhaps to accomodate a growing family. Will you be happy forking out extra money for a more expensive house plus pay tax on any price rise of your current house? I think most on this site can see that prices only increased because of easy money. That's just inflation. You want to tax inflation when inflation is already a tax?

No, even if it takes no account at all of inflation, it is still just a tax.

There is nothing more unfair about taking a chunk out of house exchanges regardless of capital gain, than there is in taxing people for working at 30%. So even if your worst vi nightmares come true and no account at all were taken of inflation, there is nothing any more unfair about this than tax policy institutions that have been taking chunks out of working people for decades.

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No offense to the OP, but this is the stupidest idea I ever heard.

I can't believe people her actually want to pay MORE taxes.

The root cause of the HPI is our debt based monetary system.

As long as the government has to find new ways to put people and themselves into debt in order to create money for the economy, HPI, bubbles and busts will exist. No taxes will change that ever, they will just make the common people poorer, while the rich will always find ways to avoid them.

Being a wise eagle, I'd have thought you would have realised by now that you are going to be stuck with your debt based monetary system.

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Being a wise eagle, I'd have thought you would have realised by now that you are going to be stuck with your debt based monetary system.

I wouldn't say so, debt based monetary systems haven't been around for that long and the current systemic crisis will most likely eliminate them.

Banksters have run their course, they will be made redundant much sooner than you think.

Edited by wise_eagle

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Given the government won't / can't tackle the cause of the recent house price mania, easy and cheap money, what are your views on charging full VAT on house purchases?

Some of the benefits I can see are: -

1) Make people think seriously about purchasing a house, returning it to being a home rather than an investment.

2) Seriously dent BTL as a speculative option.

3) Cause a correction in house prices from their current levels - good for HPCers.

4) Raise revenue for the government to pay down the deficit. People will always need to buy houses, so the tax will be collected.

5) Destroys existing capital gains from house price rises - keeps HPCers sweet.

It looks like a win-win situation for HPCers.

Do you see any other benefits or disadvantages?

I presume that people doing BTL would simply register for VAT, this would mean that:

1. They could reclaim the VAT they paid on the purchase.

2. They would have to charge VAT on their rents..so rents would become even more expensive.

So overall, no, not a good idea!

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Don't you think that taxing the gain is unfair on people who only have one home and want to move?

Nope. Not if it stops speculation and the formation of an untaxed asset bubble.

You could have bought a house 20 years ago.

I did.

Since then prices went crazy because of easy credit.

and because they represented a tax-free-price asset

Why would you happy to be penalised for that?

Because the 40% (or whatever) tax I'd pay on any gain would be way lower than the extra 300% I'd have to pay when I came to buy the next house

If the gain, because of inflation, is big enough that tax bill may be so large as to negate the possibility of them being able to move.

Or, they can't move because they can't/won't get a mortgage big enough to buy the next house, which has inflated in price 4-fold because it was an untaxed asset. Just depends how you look at it. If CGT stops the bubble, then the financial hit to trade up to the next house is less even with the tax bill.

If there's been no rise then they pay no tax; if there has then they pay a proportion, and by the very mechanism you claim will operate if there were VAT involved, the price of houses will fall ;)

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So this would mean if somebody sells a house they'd have to also become an informal tax collector for the state.

It just makes things more complicated, there's already stamp duty, hips, surveys, mortgages and solicitors to deal with, this would be just one more hassle to add to the pile.

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So this would mean if somebody sells a house they'd have to also become an informal tax collector for the state.

It just makes things more complicated, there's already stamp duty, hips, surveys, mortgages and solicitors to deal with, this would be just one more hassle to add to the pile.

It could be collected at completion by the solicitor. Problem solved.

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3) would just mean that anyone buying would pay 17.5% more. Instant hp inflation.

Er...no.

Go stand in the corner and think about economics.

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It would be great. Crash house prices (ok that would be great) and then add a truly enormous stamp duty moving tax.

Not brilliant for labour mobility and the efficient allocation of housing.

My all means tax land value, but lets not impose enormous barriers to people moving where they need to be as conditions change.

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  • 261 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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