The National Institute of Economic and Social Research (NIESR) has called for the introduction of a capital gains tax (CGT) on UK properties and said the revenue raised could be offset by scrapping stamp duty.
A new article on UK housing policy in the think tank’s in-house journal argued that a first priority must be to improve the taxation of housing.
“At present our taxation of housing is possibly the worst of all worlds. We tax the purchase of houses by stamp duty, which limits the efficient allocation of housing and labor mobility. Council tax has no connection to existing property values. Unlike other assets the income and capital gains on primary residences are untaxed. No attempt is made to tax the excess returns on housing which accrue because of its relatively fixed supply,” NIESR said.
According to NIESR, a CGT would “reduce the gains in an upturn and losses in a downturn, so dampening house price cycles.” It could also “reduce the resistance to planning, reduce ‘under occupancy,’ and even increase the flow of savings in productive investment.”
NIESR recommended that investment in properties should be exempt, and that the gains would be paid on final sale or death of the owner. The revenue raised could be offset by abolishing stamp duty.