The Scottish Government has the same problem in setting the new Land and Building Transactions Tax as it will have in setting any future devolved taxes or partially devolved taxes (your report, 10 October).
If it had control of the full suite of taxes affecting individuals and businesses it would be able carefully to adjust and balance the tax regime so that the government can increase one tax and reduce another or reduce one to stimulate the economy and receive the increased tax take from other types.
It would also allow redistribution of wealth to reduce inequality in slightly more nuanced ways than simply increasing tax of one type on the rich and reducing the same tax for the poor.
Control over a single tax, or even a few, leaves government in a very difficult position.
Being able to set this new form of stamp duty or income tax, should it be further devolved, means that changes to a single tax when you don’t control the others really have to be made in a way which is revenue neutral.
Taking money out of the economy through tax rises will raise government revenue but is likely to have a negative impact on the economy.
Putting money into the economy through tax cuts is likely to have a positive effect on the Scottish economy but will reduce government revenue from that tax without the benefit of receiving the extra tax revenue from other types, which may increase through the positive effect on the economy.
With the caveat that they may have done something completely different in the setting of this new stamp duty, as the single measure available to the government I believe the progressive nature of the rates and bands set is very cleverly done.
Anyone buying a property for less than £325,000 will be in the same position or – sometimes significantly – better off.
It is true that in more expensive areas some families with reasonable incomes will have to pay more tax. That is progression.
You can’t make any meaningful redistributive policies work without those better-off people paying more tax.
It is worth looking at the detail of this, though.
Assuming a buyer has a 10 per cent deposit available and a mortgage which allows borrowing of four times their salary: this means someone buying a house above £325,000 could have a salary of around £75,000.
That is three times the average wage in the UK and also three times the amount required for an average family to survive based on average living costs.
My calculations are quite crude, and based on assumptions, but it also means that after tax that family earning £75,000 could be able to afford to save around £25,000 a year if they spend just enough to survive including living in a property which doesn’t attract a high tax on purchase.
That allows them the opportunity, should they wish, to save for a few years to afford the extra tax they might pay when moving house to larger properties.
There will of course be many people affected by this tax when moving home who can’t really afford it, but poor people don’t live in houses worth more than £325,000 and it is hard to see how tax can be reduced for the poor without others paying more.
If Scots had been brave enough to vote Yes instead of No we would not be staring down the abyss of the Tories’ plans to cut benefits for the working poor and taxes for the rich and no voting option to avoid at least another decade of austerity.
Perhaps then Scottish finance secretary John Swinney would have had less crude methods to be progressive and redistribute wealth, which I’m sure he would have welcomed with open arms.
Neither would we face the prospect, if further devolution of income tax does happen, of playing with a single tax like this to try and reduce inequality or having to raise income tax in Scotland and effectively as a country pay twice just to try and maintain reasonable public services.
Jonathan Gordon FRICS
The current punitive UK stamp duty structure, with its flat rate band system, has indeed been long overdue for reform. It discourages or prevents people in the lower and middle income brackets from buying a home.
However, finance secretary John Swinney’s announcement in Holyrood outlining his proposed Scottish property tax has gone overboard with a draconian scheme that will stifle sales and purchases of property in Scotland and over-penalise those in the medium as well as higher priced bands, and inevitably mean that the Scottish economy is likely to suffer from reduced returns.
A modified incremental scheme could perhaps supply an acceptable solution at relatively low cost to the Exchequer.
The scheme would have incremental rate bands, a higher nil rate band (again long overdue with the historical rise in house prices) and, importantly, the cost would be shared equally between buyer and seller.
Further, to encourage first-time buyers and the new-build trade, tax on sales of new-build houses would be 50 per cent of the equivalent rate (all borne by the purchaser).
Suggested (incremental) rate bands might be £0-250,000 at 0 per cent; £250,000-500,000 at 1 per cent; £500,000-£750,000 at 2 per cent; £750,000-£1 million at 3 per cent; £1m-£1.5m at 6 per cent; £1.5m-£2m at 8 per cent; £2m-£3m at 15 per cent; £3m-£4m at 20 per cent; £4m-£5m at 25 per cent; £5m-£10m at 30 per cent; more than £10m at 35 per cent.
Rate variations, while retaining the more graduated scale, should not be difficult to make, but the principle would remain the same.
Such an incremental system would result in lower effective average rates for the majority of house sales.
The market for sales of houses (particularly those up to £1m) should improve significantly, while purchasers of properties in the much higher price ranges are more likely to be able to afford the considerably higher rates of duty needed to minimise the cost to the Exchequer.
The equal sharing of the liability would provide welcome relief to purchasers and, being in possession of the sales proceeds, sellers are more likely to be in a position to meet their share.
Such a scheme might be beneficially adopted not only in Scotland, but in the whole of the UK.