Home » Features » Is there any value in a mansion tax? previous nextRegulation & LawIs there any value in a mansion tax?It has been more or less been killed off by the Chancellor’s new Stamp Duty regime – but did the mansion tax ever have much currentcy?PROPERTYdrum30th December 20140660 Views So many questions remain unanswered about the mansion tax – and we need answers before we can properly evaluate its likely impact on the property market.For instance, at what rate would the tax be set, will it be linked to house price inflation? How many additional bands are to be included for properties over £2 million. How much is likely to be raised and will it be deferred for older people so only payable on death or the sale of a qualifying property? What could be the effect on TOTAL tax revenues and the economy in general if foreign investors are deterred from purchasing in sufficient numbers? And, if you fail to disclose your home is worth over £2million, will you be guilty of tax evasion?Even shadow minister, Andy Burnham, cannot say whether Land Registry, the Valuation Office or HM Treasury will be responsible for its implementation.Or could you argue the tax is only being demanded as successive governments have failed to provide suitable incentives for new building?!WHO WILL BE HIT?I gather that over 25 per cent of the 108,000 owners likely to be affected by the tax are – according to Zoopla – pensioners, many of whom may have been left houses by parents or grandparents, while others, who may have bought fairly modest properties when earning average salaries could now find themselves forced to move out of their homes by the extra charge.Labour previously promised that the asset rich, cash poor would be “protected” against the worst effects of the tax but it seems 99 per cent of those owning homes worth more than £2m will have to pay. Hometrack tells us that 40 per cent of eligible properties actually fall into the £2m and £2.5m category so surveyors can expect to be working on a flood of appeals as owners try to avoid liability.Mansion tax feels like a punishment for those living in London and the south east in particular where 95 per cent of properties over £2 million are affected. But there’s a mismatch between perception and reality.According to Knight Frank only about 14 per cent of homes in London valued at over £2m could be described as detached “mansions” whereas 38 per cent are flats. Apparently, more than a quarter of homes in England and Wales in that price bracket are flats located within the London Boroughs of Westminster and Kensington and Chelsea which contained nearly half of all such homes! Nevertheless, there’s no doubt that taxes influence behaviour.OTHER NEGATIVE EFFECTSMansion tax will act as a disincentive to freehold or leasehold purchases as well as property extension and improvement. More conversion of family houses into two or more flats is likely too – with many likely to be reversed after assessment.Alternatively, property titles could be split to show separate use of property for perhaps business or letting purposes as another way of reducing value and tax avoidance.Mansion tax is good politics but bad policy.” Nick Raynsford, Former Labour Party Housing MinisterEven the prospect of paying approximately £15,000 per annum, which has been suggested as the average tax due on homes over £2million, will definitely distort the housing market. The asking price of homes at or just over that level and transaction numbers are already falling and the gap with lower priced properties created by the introduction of 7 per cent stamp duty on the purchase of homes in excess of £2 million, will widen.Homes previously thought to be worth over £2m are now available at £1.95m whereas a ripple effect will result in a dip in value of properties further down the ladder. We’ve also noticed some sellers trying to take advantage of buyer interest just below £2 million by trying to inflate their asking prices. Demand is likely to be noticeably lower for properties up to 10-15 per cent above £2m as well as for those up to £500,000 below the magic number bearing in mind the rapid increase in property values over recent years.London house prices have risen on average by 610 per cent and 237 per cent in the rest of the UK since 1991 according to Land Registry! As a result, affordability may rise but buyers, especially those at lower prices more exposed to higher levels of mortgage finance, will be vulnerable to liability for mansion tax if values continue to rise.Homeowners in London and the south east already pay the most property tax in this country so is it fair for them to pay even more?The consequent downward shift in prices will probably prompt a fall in the threshold at which the tax is initially levied so that the revenue target is maintained.ALTERNATIVE OPTIONSAlternatively, wouldn’t it be preferable to use the proceeds of mansion tax to directly raise the supply of affordable housing which would help to keep prices in check and make people more aware of why they were paying the tax?Is this a mansion? A 3 bed flat in St John’s Wood, London (right), £2m with Knight Frank.Or, wouldn’t revaluation of the outdated Council Tax for the first time since 1991 represent a fairer option? The present system undertaxes higher value homes. A home worth £10million falls into the same band as a property valued at £321,000, which can’t be right.However, I think those of us living and working in London can get carried away with the mansion tax issue. Many in the rest of the country probably aren’t too worried if wealthy Londoners have to pay a bit more tax!On the other hand, what would hardworking Londoners in relatively modest three bedroom houses paying the tax think about those living outside London in real mansions with several expensive cars in their driveways who would not be liable for a penny?Taking into account the effect of the recent referendum on the Scottish property market, the uncertainty created by even the threat of the mansion tax will still compromise, property prices and crucially, transactions throughout the market – not just those above £2m. Housing supply, economic activity and job mobility will be compromised too – at least until after the election next May.Labour’s former housing and local government minister, Nick Raynsford, summed up the feelings of many when he said, “mansion tax is good politics but bad policy.” It is now clear, the wider direct and indirect costs such as capital gains tax and VAT of generating relatively little additional net revenue may not be worth all the effort!housing market mansion tax property market December 30, 2014The NegotiatorWhat’s your opinion? Cancel replyYou must be logged in to post a comment.Please note: This is a site for professional discussion. Comments will carry your full name and company.This site uses Akismet to reduce spam. 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It was quite a summer for last year’s USC varsity crew captain, senior Taylor Beach. Beach had the honor of being invited to train with members of the U.S. National Rowing team at Craftsbury Outdoor Center in Vermont, a training center that produces some of the United States’ most successful elite rowers.Beach, who began his rowing career just three years ago as a walk-on at USC, competed in the U.S. Under-23 Rowing Trials in West Windsor, New Jersey in late June and placed third in the lightweight single scull event, just missing out on securing a spot on the U.S. team after winning his two preliminary races. Beach also made the finals of the lightweight single scull event at the U.S. Elite National Championship in Princeton, New Jersey, placing sixth while racing for USC.At the same event, Beach and his four-man boat placed third while competing as a team in a race where nearly every other participant was a national team athlete or Olympian. In fact, Beach’s boat defeated the USA World University Games crew by three open lengths of water — the rowing equivalent of three touchdowns.In late July, Beach went on to win the heavyweight double scull event with Cornell senior Ned Benning, which qualified the pair to race as members of the U.S. National Team at the U23 World Championships later in the summer.There, Beach, along with Benning, placed 16th at the 2015 Under-23 World Rowing Championships in Plovdiv, Bulgaria in the men’s double scull event. While representing their country, Beach’s boat finished fourth in its final race.“Having made my first national team is the first step on the way to future Olympic selection, but there’s a lot of work left to do,” Beach said.Third-year USC men’s crew head coach Paul Wilkins, who’s worked with Beach extensively over the course of his rowing career, said that Beach gives his younger rowers something to look up to and aspire to be.“He is a tribute to how far you can go with how hard you work,” Wilkins said. “His great desire to achieve and win at the highest level has gotten him to where he is today.”A former member of the recreational club council executive board, Beach’s experience within USC’s club sports department also shows the depth and ability of low-budget programs to produce athletes who can compete at the highest levels of their sports, according to USC Men’s Crew board member Stan Mullin.With more than 50 clubs, Recreational Sports represents a diverse collection of athletes. Some of these teams aim to compete locally, others regionally, some nationally and — in rare cases — some internationally. While these sports may not operate on large budgets, they’re showing that they can be extremely competitive and successful, and Beach is a prime example of that.“It was exciting to represent my club team at the highest levels of competition in the world, and I hope it shows students everywhere in the University that walk-on athletes and those who are willing to work hard can achieve any level of success they want,” Beach said.This year, Beach, who is majoring in business administration and english literature, is spending his time training at the men’s crew rowing center in San Pedro in preparation for the 2016 Under-23 World Championships.After being founded as a varsity sport in 1948 and then reestablished as a club sport in 2001, the USC Men’s Crew program, which currently boasts over 40 members, traditionally competes nationally against other top collegiate programs.Beach says that his success at the international level wouldn’t have been possible without the program’s support, and that it’s an honor to represent USC when competing among the world’s best.“Twelve hundred USC Men’s Crew alumni and supporters have followed Taylor’s racing career, culminating in his success this summer,” Mullin said. “His integrity and leadership with the other oarsmen, coxswains and alumni are what truly make him a role model and spokesperson for the University.”Beach will look to continue his training in hopes of one day competing at the 2020 and 2024 Summer Olympics and earning a medal for the United States.
As the downsizing of the sugar industry continues to take effect in several communities, particularly those in rural areas across the country, people in civil society and those who hold high offices in politics in Guyana continue to criticise Government for the move.Opposition Leader Bharrat Jagdeo, is one such individual, who feels Government made a rash decision to downsize, without considering how their action would have affected thousands of households that depended on the industry for a daily income.Jagdeo told a recent conference that focused on how the industry could be salvaged, that some $47 billion was lost to a company by the Guyana Gold Board, which could have been used instead to resuscitate the industry and bring it back toOpposition Leader Bharrat Jagdeoa state of viability.The industry saw over 7000 sugar workers being retrenched in 2017.The former Head of State reasoned that although the Government’s continuing argument is that it lost billions each year due to the mismanagement of the Guyana Sugar Corporation (GuySuCo), those monies could have been better utilised.But besides that, Jagdeo contends that Government can find the money to invest in the sector if it wants to. “We can find the money now to afford it,” he told the conference.According to Jagdeo, the debt figure for GuySuCo that has been repeatedly cited as $77 billion is incorrect. He explained that a significant part of the money was for long-term debt, personal liability and the Guyana Revenue Authority.He said based on his calculations, the only real short-term debt faced by the industry was somewhere around $10 billion. Jagdeo feels that was manageable and Government could have worked to ensure that that was fixed, and that the industry was sustained.Having been criticised for the Skeldon Sugar Modernisation Project, which did not deliver on its objectives, Jagdeo said the fault lies with the company that was hired to oversee the implementation of the project-Booker Tate. He said they simply did not deliver.“The company failed Government by not giving enough value for the consultancy service it paid for,” he added. Nevertheless, he said that the purpose of that project was to bring some greater level of employment safety to persons in the industry. He had been quoted in various events, stating that the project was aimed at keeping “sugar alive.”The People’s Progressive Party (PPP) General Secretary also called out Government for the secret manner in which they are going about planning for the industry. He said sugar workers must be properly consulted and brought up to date with what is happening in the industry. He said thousands were caught by surprise over the retrenchment.He outlined that in Guyana, sugar is not a company, but an industry, hence Government needs to be more thoughtful when making decisions about the industry. “No viable decision can be made without a feasibility study,” he said, noting that it was a political decision.Jagdeo has long argued that the sugar industry could be sustained and can become viable if more attention is placed on fixing the current problems that exists. He recalled that between 1976 and 1996, sugar made a huge contribution to the Treasury and paid for the sugar levy.“At one time, one fifth of total Government revenues came from the sugar industry. We carried Guyana for a long period and even after that, when the sugar levy was ended in 1996 we then got GuySuCo to continue to make a positive contribution to the industry,” he had noted.The PPP/Civic General Secretary also pointed out that it was only when there was a cut in the European Union (EU) prices for sugar, it led to the industry losing $8 billion per annum in revenue. It was at that point that Government had to start looking to begin pumping revenue in the industry.However, the EU had given Guyana over €100 million as part of the transitional arrangement, which according to Jagdeo, was more than the cost of Skeldon Sugar Factory.“And so today it is not true that sugar cannot be restored in the future. It’s not true that sugar cannot be profitable. If we work real hard and we look at the multidimensional contributions of sugar to the economy we will through an economic analysis that sugar makes a bigger contribution to Guyana than the subsidy it gets in this difficult period,” he asserted.Contrary to what is being done with the sugar industry, Jagdeo said the PPP Government ensured that when the bauxite industry needed help, they pumped money into that industry to keep it alive. He said the same could be done for sugar.