British Euro Entry Could Increase Taxes For Homeowners

by Robert Lee, Tax-News.com, London

29 May 2002

The Institute of Directors has warned that British entry into the euro would almost certainly lead to tax increases for UK homeowners.

In a report released on Monday, IoD Chief Economist, Graham Leach suggested that Britain's housing market, which is currently more competitive than the markets in the majority of eurozone countries, would likely be hit by huge tax increases if the United Kingdom joins the single currency:

'Giving up control of interest rates means that the government could be forced to consider sharp increases in property taxes in order to avoid serious house price inflation,' he explained.

In addition to enjoying lower mortgage rates than other eurozone countries such as Germany, Italy, and France, Mr Leach revealed that Britain's housing market also has lower levels of stamp duty than many other European countries, and zero VAT on housing, compared with an 18% VAT rate in France.

Noting that the Treasury has cited housing market concerns as an obstacle to eurozone membership in past discussions on the subject, the IoD report urged the government to consider the impact on house prices before making any decision on monetary union, arguing that these concerns remain just as pressing in 2002 as they were in 1997.

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