Britain’s high property taxes are holding back efforts to grow the economy and provide more homes, a think tank has warned. Taxes on land and improvements are among the highest in the world, according to the Adam Smith Institute.
It called on Chancellor Rachel Reeves to use her Budget on November 26 to abolish stamp duty, increase tax breaks on new buildings and reform council tax and business rates. The think tank highlighted research showing property taxes in the UK are more than six times the average for the Organisation for Economic Co-operation and Development, a club of 38 countries with free market economies.
It also said the UK’s “broken planning system” made investment in property more uncertain and expensive.
Conservatives have announced plans to cut the cost of homebuying by abolishing stamp duty.
Sir Mel Stride, Shadow Chancellor of the Exchequer, said: “We need a tax system that maximises growth and productivity. Under the current government, not only are taxes too high, but we are taxing the wrong things. Stamp Duty is a terrible tax, but people wanting to get onto the property ladder or move house are paying even more this year than last. Abolishing Stamp Duty on main homes would free up our housing market and create a stronger, more competitive economy.”
Andrew Dauber, Founding Partner of Civitas Investment Management & Senior Fellow at the Adam Smith Institute, said: “It has never been more difficult or expensive to build in the UK. A perfect storm of high corporate and property taxes, ever increasing, complex regulation and a planning system that is often overwhelmed results in extended development timescales, reduced financial viability and a strong sense that the system itself is conspiring to prevent rather than encourage growth.
“If we are serious about pursuing a growth agenda, we must recreate the conditions and can-do attitudes that in the past saw us as the envy of the world in delivering world class buildings and national infrastructure. The proposals in this paper represent a significant start in that direction.”
Alex Mengden, Global Tax Policy Analyst at the Tax Foundation, said: “Stamp duty land tax is a tax that belongs in the 17th century. It severely distorts the allocation of property and raises the cost of capital for building, while raising little revenue.”
“The UK’s restrictive capital allowances add further to the high cost of capital for building projects, allowing businesses to write off just 39% of investment costs for commercial buildings in real terms compared to a 49% OECD average, and nothing at all for residential construction, making the UK an international outlier. As the Adam Smith Institute’s report highlights, these distortive taxes layer on top of an already restrictive planning system.”