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Tuesday, 19 January 2021

PROPORTIONAL PROPERTY TAX -- PPT

 PROPORTIONAL PROPERTY TAX -- PPT

A brilliant campaign for worthwhile improvements

From their Website Council tax is broken. Help us fix it. - Fairer Share Campaign

Here's the gist of what they propose  (I'll add a version with comments later)

1. Council Tax to be replaced with a simple Proportional Property Tax, charged as a fixed flat percentage of property value of 0.48%, double that for second, empty and non-resident owned homes.

2.  Stamp Duty Land Tax (SDLT) on owner occupied property should be abolished. Stamp Duty should however remain in place for second home and non-resident buyers.

3.  Property tax should be collected directly from owners, not tenants.

4.  A deferral mechanism should be introduced for those owners genuinely unable to pay. 

5. The majority of reliefs and exemptions, including those for single occupants, second homes and empty homes be abolished. The ineffective and unfair “Bedroom Tax” should also be removed.
6.  A revaluation of all residential property must take place as soon as possible, with annual revaluations thereafter, using technology, based on their average value across the last three years.

7.  Property tax should also apply to undeveloped plots of land that have received planning permission to encourage developers to get on with  building not waiting for the value of the plot to increase.


LOOKING AT THESE PROPOSALS IN MORE DETAIL

SEVEN KEY REFORMS

1.  The confusing Council Tax band system should be replaced with a simple Proportional Property Tax, charged as a fixed flat percentage of property value. Based on extensive analysis, we recommend a flat rate of 0.48%, with a higher surcharge rate of 0.96% for second, empty and non-resident owned homes.

--This nationalises CT taking the last vestiges of independent fund-raising away from Local Authorities, a major political power-grab.
--There will be many winners in deprived areas from this, but the main losers will be in the affluent SouthEast and London. In many cases their loses will be huge. 


2.  Stamp Duty Land Tax (SDLT) on owner occupied property should be abolished. This would unleash a wave of housing transactions and help address the ongoing housing crisis. There is clear evidence that Stamp Duty is acting as a barrier to households that want to downsize, hindering the optimal use of existing property and making homeownership more expensive for all.22 Stamp Duty should however remain in place for second home and non-resident buyers.

--SDLT is a very bad tax, economically inefficient, hated by the taxpayers. It's abolition is highly desirable, but is the proposed PPT the best replacement?

3.  Property tax should be collected not from tenants, but directly from owners, who are in a better position to pay. This would bring England into line with international practice, and reduce administration for councils, due to there being fewer owners than individual properties (due to multiple ownership).

--A sop to the local council to make their job of collecting PPT easier! But shouldn't a national tax be collected by HNRC?

4.  A deferral mechanism should be introduced for those owners genuinely unable to pay. Tax and a modest interest charge could be paid at a later date or, if need be, upon sale of the home, thereby avoiding the debt issues that have plagued the collection of Council Tax.

--As always the 'lonely widow' will be used to oppose the change, so sensible to state this early on. 

5. Property taxation should be made simpler and fairer by abolishing the majority of reliefs and exemptions, including those for single occupants, second homes and empty homes. The ineffective and unfair “Bedroom Tax” should also be removed. These reliefs complicate the system and have unintended negative consequences

--Creates another category of losers. Quite right, but wise?

6.  A revaluation of all residential property must take place as soon as possible, with annual revaluations thereafter.23 Improvements in technology make this much more feasible than in the past. Properties should be taxed on their average value across the last three years, to ensure that increases in property value are subject to taxation.

--Annual revaluations are VITAL if the PPT is going to have a beneficial effect on the housing market. It is so easy for politicians to 'postpone' these, especially if big changes are threatened. So all praise to the authors of PPT for going for a smoothed 3-year average (elsewhere it was a 5-year average), so the annual change is gradual. But will this prevent mass-revolts by the home-owning voters?
--The old canard that the task of revaluing all 24 million properties annually is impossible has been blown away! Technology really can do it. I know, because I showed how multiple regression analysis made this possible 27 years ago in a paper in the Journal of Valuation! 

7.  Property tax should apply to undeveloped plots of land that have received planning permission from the local council. This would discourage developers who purchase land and refrain from building while they wait for the value of the plot to increase.

--Whacking the likes of Carillion is always good fun. But why do they hoard land? Not just for the fun of it, so this proposal doesn't solve their underlying difficulties.

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