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Rachel Reeves has been warned that she Plans for mansion tax reported will not fill £50 billion budget black hole , And sweeping changes to Britain’s property taxes are needed.
The Chancellor is said to be considering imposing a fee on Owners of properties worth at least £2million to face annual charges 1 per cent of the amount over that limit – meaning a charge of £10,000 a year for homes worth £3 million.
But Ms Reeves now faces calls to go even further, with economists and MPs calling for a sweeping reform of property taxes in Britain.
It comes like this Housing Secretary Steve Reed Repeatedly refused to repeal the mansion tax before the budget.
Paul Johnson, former director of the Institute for Fiscal Studies (IFS) told Independent The government should reform taxes so that council tax is proportional to the current value of a property, as well as abolishing stamp duty.
Former Treasury economist Jonathan Portes agreed, saying that replacing council tax with such a proposal was “neither radical nor rocket science”.
However, they both warned that the mansion tax proposal would not be enough to plug a significant portion of the black hole the Chancellor faces, which is estimated at as much as £50bn.
Chris Curtice, co-chair of the Labor Growth Group of MPs, told Independent that “the way we tax wealth in the UK is clearly broken”.
He said, “Council tax is still based on 1991 values and capped at the top band, so a small family home may have to pay the same per year as what a £50m Mayfair mansion would pay.”
“Then, when those mansions are sold, the stamp duty gets charged to a huge sum and the market shuts down. It is counterproductive, regressive day to day, and punitive at the time of transfer, so it affects the entire housing system.
“It is not easy to fix, but it is right that a progressive Labor government considers how it can be improved.”
Mr Johnson said a mansion tax on properties worth more than £2 million “makes some sense”, but he warned it would “not be enough to plug a significant hole”.
“At present such houses are definitely taxed less,” he said. “I would be very happy with a proper comprehensive reform of property taxes, which made council tax proportionate to current value and got rid of stamp duty.”
The Chancellor is widely expected to use the Budget to raise taxes once again Indian Foreign Service estimating that he needs to find £22 billion through tax increases or spending cuts to meet the fiscal rules he has imposed.
meanwhile, The National Institute of Economic and Social Research has suggested the black hole could be as big as £50 billionResulting in sluggish productivity, government U-turns and higher than expected interest payments.
Mr Portes said the reported mansion tax policy was “a start”, but he encouraged the Chancellor to start the tax at a lower threshold.
He said, “I would simply abolish council tax and replace it with a percentage tax. This is neither radical nor rocket science – it is simply doing what most other advanced economies do in some form or another.”
“Certainly they’re not going to do that because it’s a huge change from where we are now, but they can and they should say this is the long-term goal.”
He added: “I don’t think the mansion tax will raise huge amounts of money, certainly not compared to the overall need.”
There are also fears that the mansion tax will turn the economy into a “stagnant swamp” and choke off the London property market.
Becky Fatemi, an executive partner at Sotheby’s, said Wire High net worth individuals now see “no incentive to stay here.”
He warned that the government was “dramatically shrinking the economy and creating a stagnant quagmire”.
Meanwhile, the Liberal Democrats have accused the government of a “tax grab” without reform.
The party’s treasury spokesperson and deputy leader Daisy Cooper said Independent There is “no doubt” that the way homes are currently taxed is “unfair”, pointing to council tax rates and stamp duty costs.
He added: “It is right to look at whether there are ways to overhaul the system and make it fairer, but Labor’s aim with taxes so far has been to try to get more cash in the short term rather than properly reforming them for the future.”
Asked about the mansion tax on LBC, Mr Reid said: “Well, I’ve seen some speculation about it and it’s never a good idea for a minister to come and speculate.”
Asked whether he would support such a tax in principle, he said: “You’re asking me to guess, given that we have a budget coming out soon.”
Asked again, he said: “It would be better for me not to answer that question. It would look as if I were advising the Chancellor as to what he should or should not do, and that is not a good idea for a minister.”
It came as Ms Reeves’ former boss, former Bank of England governor Mervyn King, suggested on Sunday that the government did not have a “coherent” tax strategy and that the problems within the system could not be solved “by just adding another wealth tax into it”.