ONE of Alex Salmond’s most eminent economic gurus has called the Scottish Government’s plans to replace Stamp Duty with another property transaction tax ill-advised.
Professor Sir James Mirrlees, a Nobel Laureate and a member of Salmond’s Council of Economic Advisers, has expressed reservations about the plan, which is a key part of SNP economic policy.
The SNP government last week closed its consultation on its proposal to introduce a Land and Building Transaction Tax instead of Stamp Duty.
The Scottish Government argues that the new transaction tax will be fairer because it will be more closely related to an individual’s ability to pay and more directly linked to a property’s value than traditional Stamp Duty.
The plan has attracted criticism because it proposes setting up a new Scottish tax-gathering quango, Revenue Scotland, to take on the role of HM Revenue & Customs when it comes to collecting the new tax north of the Border.
However, Mirrlees, Emeritus Professor of Political Economy at Cambridge University, believes that transaction taxes should be abolished.
He told Scotland on Sunday: “A government that is free to choose the form of taxation overall is not well advised to use transaction taxes.”
Mirrlees chaired a review for the Institute of Fiscal Studies that called for a radical overhaul of the taxation system.
His review suggested that the abolition of Stamp Duty should be accompanied by council tax reform, so that payments are based on up-to-date values proportional to house value. Mirrlees said the reformed council tax would be named a Housing Services Tax.
It also recommended the abolition of business rates and stamp duty land tax on non-domestic property and their replacement with a land value tax on business and agricultural land.
Yesterday Mirrlees added: “I was the chairman of this report, and indeed one of the recommendations was that one should not have transaction taxes and indeed there should be a more comprehensive and, in our view, more sensible taxation on property.”
Mirrlees’ position on transaction taxes was referred to in a submission to the Scottish Government’s consultation on the new transaction tax made by Andy Wightman, the land reform campaigner.
In his submission, Wightman argues: “I believe that SDLT should be abolished and replaced with a wider, more coherent land and property tax. My preference is for an annual levy on the rental value of site values, otherwise known as Land Value Tax.”
Wightman adds: “In this context, it is disappointing to note that no account appears to have been taken of the significant review of the UK taxation system led by Professor James Mirrlees.”
A Scottish Government spokeswoman said: “Without a land and buildings transaction tax, the Scottish Government would lose essential revenue for funding public services.
“Our illustrative proposals show that between 86 per cent and 95 per cent of homebuyers in Scotland would pay less in tax than under the UK’s current stamp duty system.”