Tax and Fiscal Policy

Government should be alert to possible unintended consequences of a “mansion tax”


Government and Institutions

Emma Revell writes for the Evening Standard

Responding to reports that the Prime Minister is planning to impose a “mansion tax” on owners of expensive homes, the IEA’s Academic and Research Director Syed Kamall said:

“The UK already faces some of the highest property taxes in the western world when stamp duty, inheritance and council tax are taken into consideration.

“While there may be reasons to look at council tax bands, this would be better left to local authorities. A national mansion tax would be seen by many as double or triple taxation, whereby they have paid tax on their income and then paid tax on their savings and are then taxed again on a house bought with that income and savings, in addition to facing a possible raid on their pensions.

“Governments should always be alert to possible unintended consequences of their decisions. Levying a mansion tax may discourage home owners from investing in home improvements such as energy efficient boilers and other environmental improvements. It might also lead to attempts to divide properties into less valuable properties to avoid the tax altogether. It might also see the Government lawyers bogged down in fighting court cases as homeowners challenge valuations.

“In seeking to appeal to their coalition of voters, many new and long term Conservative voters probably wanted lower and simpler taxes. If they had wanted more taxes and a more complex tax code, they would have probably voted for Labour.”