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UK Mansion Tax Ruled Out

by Robert Lee,, London

09 October 2012

While the UK government has said that the wealthy should be expected to shoulder a larger burden of the country's austerity measures, the Conservative leadership has ruled out the introduction of a so-called 'mansion tax' or temporary wealth tax any time soon.

As the Conservative Party annual conference got underway in Birmingham at the weekend, Prime Minister David Cameron revealed in a television interview that "further action to ensure rich people pay their fair share" will be unveiled before the next general election in 2015. However, he confirmed that this would not involve an annual levy on high value property, a favoured policy of the Conservatives' coalition partners, the Liberal Democrats. "That is not going to happen", he remarked when questioned on the subject.

The Lib Dems have long campaigned for a 1% levy on property worth at least GBP2m (USD3.2m). But Chancellor George Osborne thinks that a 'mansion tax' would in reality hit many people with relatively modest incomes because of the rapid appreciation in property prices over the last few decades, especially in places like London.

"I don't think the mansion tax is the right idea because I tell you before the election it'll be sold to you as a mansion tax then after the election a lot of the people in Britain are going to wake up and find their more modest homes have been reclassified as a mansion," he said.

Besides, the government has already introduced a form of 'mansion tax' in the shape of a new Stamp Duty Land Tax (SDLT) rate of 7% for residential properties over GBP2m. Furthermore, SDLT on residential properties over GBP2m bought through a company structure was raised to 15% in the 2012 Budget, and the government has proposed an annual levy on those GBP2m residential properties already purchased in such a way. The government therefore considers that additional property taxes are unnecessary.

Osborne also ruled out the idea of an annual tax on wealth, arguing that such taxes had been tried in other countries, only for enterprise and investment to be driven abroad.

Like Cameron however, Osborne was clear that "the rich will have to make a contribution to closing the budget deficit”, but without going into further detail.

TAGS: individuals | Wealth | tax | investment | real-estate investment | real-estate | United Kingdom

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