Sunday, 16 March 2014

Pipers, Pipe Dreams And Property

For reasons known only to the more malign deities of the heavens and hellholes the UK has allowed our property markets, note the plural, and landholding arrangements to become central to the economy and its governance.

It would take the equivalent of one of those huge Victorian or earlier three volume sagas to begin to explain all the many and various complications that face us, one way or another, in the basic business of where we live, why and what we do.

One theory about The Fall Of The Roman Empire is that they spent so much time arguing about land holding, the monetary implications and the religions entwined in this that they ignored the enemy at the gates and the defence of the realm.

There are now lobby groups determined to block any intrusions into the market or taxation by governments or politicians trying to deal with some of difficulties.  Especially, when the dreaded word "tax"  is mentioned or changes mooted.

Boris Johnson, our Mayor of London, especially where property is concerned and the connected finance and votes is taking the lead to attack any added taxes. 

One key reason he gives that as it has been 23 years since the last revaluation any changes in England and Scotland (Wales 2003), especially on properties with high value, as in London, will have more impact than in for example, East Ayrshire, where the values are much lower.

The present system of Council Tax is based on an eight bands which often work in mysterious ways.  1993 was the year it came in replacing the unpopular Community Charge, essentially local tax by head count (Poll Tax) of 1989.

Before then we had the Rating System that had lasted a long time subject to much meddling and tinkering.  This had become a shambles and in left wing Local Authorities had been a factor in the severe damage done to small firms and traders.

However, the 1991 valuation date for assessments of Council Tax cut off at the top at £320,001, which means for the top value expensive homes it did not become a Property Tax in the full sense of the term. 

Even when it was paid, because one of the banes of the Council Tax is the extent of evasion and especially by many in the high value properties.  How does Coketown Council deal with owners registered in secret accounts in the Cayman Islands?

Another difficulty is that because of the shifts and changes of balance of values here and there the fine tuning in the middle and lower bands of 1991 means that where many properties were wrongly valued at the outset the position has worsened.

Parallel to this we have the debates about other forms of taxation.  How much VAT and other taxes can the consumer market stand?  Just what levels should the Income Tax be levied at, especially as for some, notably those living in high value properties, it is avoidable?  

If we try to tax imports this impacts on notions of Free Trade, let alone retaliation against our exports. Inheritance Taxes are paid only by the unwary, the unlucky and the unwise.  Alcohol, tobacco and sugar taxes may appeal to the health buffs but will not begin to pay for all our demands.

For the whole of my adult life local taxation has always been unsatisfactory and damaging one way or another as have the compromises and shifts of trying to tax property.  

This has had its effects on other sectors of taxation.  As the weight of central government spending and the greater duties imposed on local councils increase there is no improvement in sight.

The fearsome thought is that it may not be possible and we are trapped in a mire without any exit.  What could happen is that eventually the markets begin to self correct.  If so it could turn very nasty.

Anyone for levels of negative equity equal to or greater than life times earnings, never mind the interest?

1 comment:

  1. As I understand it replacing many forms of income and property taxes with a land value tax based on rental values would kill many birds with one stone. Not least among them is tax evasion and avoidance and better controlled and a less economically damaging housing market. Coupled with which with direct income tax removed wealth creation would be greatly enhanced the surpluses from which the left wing loons can spend on their pet ideological crazy projects to their hearts delight without damaging the rest of us.