Monday, April 4, 2011

Rearranging deckchairs on the Titanic.

Bank calls for stamp duty to be paid by sellers, not buyers

A new and permanent reform of stamp duty would mean that the tax would be paid by sellers and not buyers. The call for reform has come from HSBC which found that 85% of non home-owning young adults (18 to 34-years-old) want to own their own home, but only 19% of the 85% expect to be able to do so within the next five years. And almost half – 45% of aspiring home-owners – do not ever expect to be able to purchase. In its report, First Time Buyers: Roadblocks and Ways Forward, HSBC found that the younger, 18 to 24-year-old age group was the more optimistic.

Posted by sibley's b'stard child @ 10:49 AM (2595 views)
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34 thoughts on “Rearranging deckchairs on the Titanic.

  • I can’t believe this fu ked up logic. Vendors will just shift the tax onto the asking price, so the buyer will be expected to pay anyway.

    TOTAL NONSENSE.

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  • I think this is a good (though trifling) move as it captures a % of realised speculative gains. Sellers already charge the most that the market can bear, so will not be able to simply pass on the costs (because of competition from other sellers). [@doomwatch: one might equally argue that buyers are currently deducting the costs from their maximum prices.]
    N

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  • If we must have Stamp Duty – a rather regressive tax, that restricts social mobility; then making it payable by the vendor rather than the purchaser does have some minor advantages..

    But the notion that this would magically unlock the property market – as this pieces suggests; is clearly absurd..

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  • mark wadsworth says:

    What a stupid idea, as DW explains. In economic terms, the tax is borne entirely by the vendor.

    Interestingly, until recently there was no rule at all saying that the purchaser had to pay, but as the HM Land Registry would not be updated until one or the other party paid, the incentive was on the purchaser to pay it.

    It would be quite easy to have a rule that says “The sale proceeds must be held in escrow and will not be released to vendor until the SDLT is paid”, in which case the vendor would have the incentive to pay it.

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  • abolish it, why should people be penalised for moving home, same with death tax (IHT) abolish it, it is immoral paying taxes all your life paying taxes on items you will only end up leaving to your siblings to pay taxes again

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  • montesquieu says:

    I’m all for this. But they need to make the tax progressive at the same time, the current jumps in level (particularly the one at £250k) have a distorting effect on the market.

    As nickb says, it goes some way to capturing speculative gains.

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  • mark wadsworth says:

    Mark, yes of course, SDLT and IHT will be among the first taxes to be rolled into Land Value Tax (along with Council Tax and TV licence fee).

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  • “yes of course, SDLT and IHT will be among the first taxes to be rolled into Land Value Tax (along with Council Tax and TV licence fee).”

    If it ever happened – which it won’t..

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  • mark wadsworth says:

    UT, just because something seems unlikely doth not prevent if being the right thing to campaign for (see also: votes for women, getting out of EU, British leaving India; Soviet Union collapsing etc).

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  • ontheotherhand says:

    Doomwatch is correct. It is economically exactly the same. Like many taxes it drives a wedge between the buyer and seller no matter who pays it. A relative is currently buying her first place (my advice is not heeded), and together with her husband they are working out the maximum they can borrow on top of their deposit, and then they work out how much a candidate property will cost including stamp duty. Same difference if the seller paid stamp instead, he would instantly figure out with the estate agent that he must put his asking price up by the equivalent.
    Similarly nickb, it also makes no difference to an employee or employer which one of them has to pay tax for the existence of a job. Whether you pay income tax/national insurance or the employer pays job taxes, it’s the same. The employer has a certain budget to employ someone with certain skills that will result in a marginal profit. If your tax goes down by 10% and the employers up by the same, it hasn’t created any new money!

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  • why should we pay a TV licence let them have adverts and finance their own wages, I dont like paying for propaganda TV

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  • mark wadsworth says:

    Mark, you are jumping to conclusions. Where or when did I ever say that the BBC should be state-funded?

    By all means, step 2 of the plan is to cut off taxpayers’ money from BBC, but that £3 billion a year saving will go towards cutting other bad taxes and not towards cutting LVT good tax.

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  • Stamp duty is a particularly stupid and unfair tax.

    Why should you have to pay it on the whole value of the property when you go up to the next level? Totally unfair – and also market distorting.

    Much better just to scrap it and fire as many outreach workers / cycling officers / equality coordinators as necessary to balance the books.

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  • MW it was my thought not a jump to conclusion

    there are a lot of taxes out there which are a waste, waste of resource waste of energy waste of time, rolling them up does not help some should simply be abolished.

    Road tax should be rolled up into petrol, of course this will never happen as they like this to track us. As for the new speed cameras they are testing these should be abolished as they track the car movement around the whole city and use average speed for booking you with and of course they know where you have travelled

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  • 11. mark

    I haven’t watched conventional TV for many years now. It’s easier than you think.

    When I do catch some It makes me wonder why I ever bothered having a TV.

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  • mark wadsworth says:

    Mark: “Road tax should be rolled up into petrol, of course this will never happen as they like this to track us.”

    Music to my ears. I see no harm in them charging us £50 or whatever for registering ownership each year (this all helps the police track down car thieves, acts as proof of ownership etc) but this is just one of a myriad of “bad taxes” on cars and motoring, e.g. benefit in kind charges, VAT on cars and repairs and petrol, congestion charge, bridge tolls, parking fines etc. Scrap the lot and roll it into a higher, flat rate Fuel Duty, job done.

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  • MW

    just a thought if they did roll all those taxes into fuel duty how much do you think the government would save in costs, such as staff reduction, offices, paper for those afwul 60’s style tax discs etc

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  • orcusmaximus says:

    mark

    TV license fee is good! Or at least, having TV channels which do not need to be funded by advertising is good. It sets a baseline against which all the advert funded channels have to set themselves against. Make your adverts too intrusive, and people will not watch your channel! If you’ve ever watched TV in the USA, where all channels have adverts, and as a result the adverts are really intrusive, then you’ll see just how lucky we are to have the BBC over here.

    Agree about the fuel duty though.

    MW
    What would you replace parking fines with? Maybe LVT wouldn’t work for this one 🙂

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  • Yes i do see TV in USA and adverts are annoying, however the TV licence funds the government propaganda machine called the BBC, I am happy with the frequency of adverts on ITV etc, in the USA it is simpler to get broadband and subscribe to hulu or netflix and watch without the adverts, it is possible to view last nights episode on the web without ads too.

    Orcusmaximus

    regarding parking fines I saw the impossible on sat night in manchester (rusholme) a guy had parked on double yellow lines two parking attendants walked up and waited for him to arrive and asked him to move they didnt issue a fine amazing.. not sure if it is because of the area. parking fines should be reduced and parking should be improved wardens well are they there because of the cost of fines and do they pay for themselves?

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  • I actually think this is a very good idea. It’s what it is in Germany for example.

    It’s nothing to do with the price of the house – that will just be higher to offset the tax as people say.

    … more later, when I get back

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  • mark wadsworth says:

    OM, on closer inspection, parking fines are a kind of LVT, but they are usually out of proportion to any harm caused to others by parking there or the benefit to the person parking.

    So if you “forget” to buy a ticket for £1 or something, by all means, they should send you a bill for £1 plus maybe £5 handling charge, but that is the end of that, these £40 or £100 penalties are “cruel and unusual punishments”. Similarly, if you inadvertently park in a private car park, they’d be perfectly entitled to charge you £10 for a full day’s parking if that’s the going rate for a full day’s parking, but not a penny more than that.

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  • My 2 cents re. motoring taxes:

    1) Make insurance companies responsible for issuing tax discs – no disc, no insurance..

    2) Get the EU to do something useful for a change, and abolish all road/bridge/tunnel tolls europe wide; and require countries to make up the loss of revenue through increased fuel duties – so big thirsty cars pay more, small cars pay less – and no stupid interruptions to your journey..

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  • the number cruncher says:

    I do think the BBC news is biased and is very conservative (small c) It is a fact that many of its senior news editors will take a second tax free salary from one of our secret intelligence services.

    A license fee is a regressive tax and should be part of a form of LVT. A tax on the use of radio frequencies is a brilliant idea as they are a natural monopoly and it is better that their economic rent comes to offset our other taxes than into the supper profits of telecom and broadcasters coffers. A yearly auction of bandwidth in the electromagnetic spectrum would be the best solution.

    But I do think that there is an essential role in having media outside a corporatism’s influence. Look at America or Italy where TV is just an extension of the political views of those who control it and are very influential in moulding minds to support corporate agendas.

    The BBC, even in its current, form is better than that. The BBC (apart from the Kelly/ Gilligan affair) are normally very faltering to the Government in power and as such make themselves invaluable to those in the Government of the day. This is why we will never see a Tory Government disband the BBC even though it would be hugly popular amoungs the rabid unthinking right.

    What we want is a independent (of state or corporate interests) channel centred on the brilliant output of Cbeebies, CBBC, BBC learning including the Natural History unit, independent news and documentaries with a editorial board of real independent journalists, scientists and academics would look at factual accuracy and balence. We need standards of information that are accurate and informative, not just puerile and titillating and will not put off advertisers.

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  • the number cruncher says:

    UT at 21

    I like it, 2 excellent policies, especially the road tax one Though a Land Value Tax would be much better as you capture some of the increased value to society of road infrastructure improvements, which can be reinvested in the infrastructure.

    My only concern with the private issuance of tax discs is that it could be turned into a barrier of entry to small competitors.

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  • mark wadsworth says:

    TNC 23, bridge tolls are fine in principle (and they are OK for very long distances like in France) but in practice the costs of collection (i.e. time and petrol wasted in the queue) vastly exceed the actual tax, so they fail for practicalities (not principle).

    And scrapping bridge tolls has the automatic effect of boosting surrounding land values by at least as much (see famous WInston Churchill speech), so if we had LVT, this would be a no-brainer.

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  • MW

    Liverpool tunnels are a fine example supposed to free after debt was supposed to be paid off via tolls, never happened

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  • europeanbear says:

    Making the seller pay the stamp duty inflates the price. Example. Sale price 200,000. Purchaser needs 20% and stamp duty of 1%. That’s 42,000 before he can proceed. If the seller pays, a buyer with 42000 cash can now afford 210,000 as now all his 42000 goes into the deposit rather than the stamp duty. The seller pays the 2100 stamp duty and is better off by 7900 and the purchaser now has a mortgage of 168,000 rather than the mortgage of 160,000 if the buyer pays the stamp duty. So sellers wins by 7900, banksters win by 25 years interest on an additional 10,000 of mortgage, the government wins with an extra 100 in taxes and the purchaser looses. So it is a winning idea all round…surprised it has not already been adopted.

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  • europeanbear says:

    Making the seller pay the stamp duty inflates the price. Example. Sale price 200,000. Purchaser needs 20% and stamp duty of 1%. That’s 42,000 before he can proceed. If the seller pays, a buyer with 42000 cash can now afford 210,000 as now all his 42000 goes into the deposit rather than the stamp duty. The seller pays the 2100 stamp duty and is better off by 7900 and the purchaser now has a mortgage of 168,000 rather than the mortgage of 160,000 if the buyer pays the stamp duty. So sellers wins by 7900, banksters win by 25 years interest on an additional 8,000 of mortgage, the government wins with an extra 100 in taxes and the purchaser looses. So it is a winning idea all round…surprised it has not already been adopted.

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  • ontheotherhand says:

    [email protected] 26 and 27. Interesting. So you’re basically saying that the buyer can get leverage on the stamp duty pot of cash? I’m not so sure since most people pay the stamp duty with the mortgage.
    So;
    For sale price of 200,000 and buyer pays that and stamp duty (=202,000) and bank requiring 20% deposit, total deposit required = 40,400

    Take that same 40,400 and now figure the seller pays stamp duty, so seller needs an extra 2,000 and knows buyer has it.

    Sale price =202,000 (roughly), seller pays 2,000 stamp duty, buyer pays 200,000 requiring a deposit of the same 40,400.

    It’s the same….

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  • Having worked at the Beeb and seen what a monumental waste of money it is from the inside, I can’t see them getting rid of the licence fee for the thousands of people it directly and indirectly employs at a realtively small cost to those households that do pay it.

    Same with the road tax. Loading petrol heavier makes more sense because then nobody can avoid paying it and the more you drive, the more you pay. However, it keeps a load of people employed in non-jobs and so is easier to leave as is when there’s nothing else for them to do.

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  • I don’t think it’s absolutely the case that “Making the seller pay the stamp duty inflates the price”. I can see this temptation is possible, but in other countries, sellers paying the has not necessarily inflated prices. I know this is counter-intuitive though.

    But if the seller paid stamp duty – or the sales transfer tax for want of a word – then I see maths as follows…

    Seller needs £200k for his/her house. Since he’s got to pay tax, he’ll need to inflate the price to cover the tax. Sale agreed price of house now needs to be £202k. Or will it be the case that the seller swallows the tax to secure the deal. In a falling market, I can see sellers “paying the tax” just like shops offer to pay the vat to secure a deal. Especially professional new homes people. Then expect normal house sellers to be in the position of being seen to ask for more cash….? Don’t think so.

    What I think will happen is that the sellers margin on sale is reduced:- making property slightly less attractive as an investment since the market price will be preserved.

    .. discuss??

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  • mark wadsworth says:

    Guy M, I personally don’t mind the DVLA, and i don’t think it employs many people. Either way, whether the tax is £50 a year or £hundreds, it requires the same number of people to administer.

    Actually, it’s 8,460 employees, I Googled it. Let’s assume half do road tax @ £20,000 each + 50% for overheads divided by twenty million cars = £6.34 per car per year, so let’s call it a tenner?

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  • Europeanbear says:

    Guy and Growler – Where there is a shortage of a commodity (houses in a bull market with credit a plenty), then yes, I think having the stamp duty in the buyers hands gives him extra cash to leverage up the price and the price will affect the ability to pay…(i.e. more). In bear market it might not havethe same effect….but it still gives the purchaser more buying power as he does not have to cover the tax. You say making the seller pay has no effect in other markets – how do you know? In these other markets, if the buyer paid the transfer tax perhaps the price would be lower….And you talk about what the seller needs…basically if the seller will sell he will get what he can get, which may be much more than what he needs. If most people roll up the stamp duty with the mortage then your maths may be better. I have been out of the UK housing market since 1992. Between 1986 and 1992 I moved 3 times in the UK and brought and sold 3 times and I always had to find the stamp duty in Perhaps things have changed!addition to the deposit, rather than funding part of the stamp duty. If the banks are demanding 80% LTV max for mortgae, then your maths means that for a purchase of 200,000 house, this becomess 202,000, stamp duty plus deposit paid by purchaser is 40,400. But as the seller has recieved 200,000 who has actually paid the stamp duty? The bank by providing a loan for 161600. But the house has not increased in value, so now the LTV is 80.8%, i.e. above the 80% limit….as the mortgage is now no longer 160,000 but 161600

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  • Can we create a pledge link to come up any time LVT is mentioned on this site?

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