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UK Opposition Labour Party Confirms Mansion Tax Plans

by Robert Lee, Tax-News.com, London

26 September 2014


A future Labour Government would introduce a "mansion tax" on houses worth more than GBP2m (USD3.3m), party leader Ed Miliband has said.

Speaking at Labour's last annual conference before the 2015 UK general election, Miliband said that the revenue generated would be used to fund improvements to the National Health Service (NHS). Miliband would also seek to raise GBP1bn through a clamp down on hedge funds' use of tax loopholes.

Together these initiatives would ensure that Labour would not have to "borrow an extra penny" to fund the NHS reforms, Miliband said.

Further details of the plans were given by Miliband's Shadow Chancellor, Ed Balls, who told the conference that the tax would be levied in a "fair, sensible, and proportionate way."

Labour would raise the limit each year in line with average rises in house prices and put in place protections for those who are asset-rich but cash-poor. Balls said that the system would be progressive, by "ensuring those with properties worth tens of millions of pounds make a significantly bigger contribution than those in houses just above the limit."

The policy has attracted criticism from industry experts however. Jeremy Blackburn, Head of UK Policy at the Royal Institution of Chartered Surveyors, said: "While the mansion tax would be popular with a majority of the population, we believe it is inherently unfair, especially to cash-poor, property-rich owners. Furthermore, it would be difficult and complicated to run and has unqualified operational costs, which could lead to lost tax revenue, depress the GBP2m-plus residential market, and reduce the attraction of the UK for investors."

"Alternative solutions such as reforming the current council tax – which is based on property valuations that are 25 years out of date and means the charge for a home worth GBP600,000 is the same as one valued at GBP6m or GBP60m – must be considered by a future Government if such sums of money are to be raised by taxing property," he said.

Council tax reform was also raised by the Adam Smith Institute in its response. The Institute's Head of Policy, Ben Southwood, said: "It makes no sense to create a whole new property system at an arbitrary GBP2m cutoff point; instead, council tax should be revalued and remodelled along more progressive lines, to reduce the tax burden on people in less expensive properties."

TAGS: tax | property tax | tax avoidance | real-estate | hedge funds | United Kingdom | health care | tax rates | tax reform | trade association | trade

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