Bletchleyite
Veteran Member
Most urban gardens aren't wildlife havens, they're just grass, or even plastic grass. Public parkland has a lot more value.
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Proposed VAT on Private Health Insurance
- Thread starter dcbwhaley
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Most urban gardens aren't wildlife havens, they're just grass, or even plastic grass. Public parkland has a lot more value.
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R
RailUK Forums
You haven't answered the question - it is ok to tax other peoples' money (or have the value of their wealth reduced) but not your own? So what is this land that is not used for farming, or business or essential housing? Peoples gardens? i hope some of your wealth is going to be taxed and reduced in value by this proposal, so be it. Too bad.
Bletchleyite
Veteran Member
Of course it is. Not all money is taxed. For instance, I pay tax on my earnings but someone earning under the threshold does not.
brad465
Veteran Member
There are taxes that exist primarily to discourage the practice involved, the duty on alcohol and cigarettes being classic examples. Certain rates in a land tax would do likewise.
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GusB
Established Member
We're getting away from the original topic of VAT on private health insurance. Perhaps the subject of taxing land could be split off into a separate thread, or the scope of the current thread could be widened to cover this, and other, ideas for raising government revenue.
There's a lot of land out there that isn't being used for farming, or business or essential housing. We're talking about derelict brownfield sites where maybe there was once industrial activity but the land isn't currently being used and existing buildings are rotting away.
There's also the issue of land banking, where commercial organisations (or extremely wealthy individuals) buy up land with no plans to immediately develop it; this could be in order to preclude a competitor from setting up shop nearby or, in the case of house builders, drip-feed new-build houses into the market as and when it suits their bottom line rather than providing much needed housing.
I don't think that anyone is suggesting that Great Aunt Beatrice should suddenly pay through the nose for having a large garden attached to her Victorian villa that just happened to increase in value over the years. That's not the sort of situation that a Land Value Tax would target.
Do your require the use of a ladder to assist with dismounting your rather tall steed?
There's a lot of land out there that isn't being used for farming, or business or essential housing. We're talking about derelict brownfield sites where maybe there was once industrial activity but the land isn't currently being used and existing buildings are rotting away.
There's also the issue of land banking, where commercial organisations (or extremely wealthy individuals) buy up land with no plans to immediately develop it; this could be in order to preclude a competitor from setting up shop nearby or, in the case of house builders, drip-feed new-build houses into the market as and when it suits their bottom line rather than providing much needed housing.
I don't think that anyone is suggesting that Great Aunt Beatrice should suddenly pay through the nose for having a large garden attached to her Victorian villa that just happened to increase in value over the years. That's not the sort of situation that a Land Value Tax would target.
Of course one of the reasons for IPT and VAT being separate schemes is to prevent banks and insurers from having significant amounts of VAT income to set off against VAT paid. So aligning the schemes has a significant risk of revenue loss.
Sorry it wasn't very well phrased in the first place! The idea is that VAT is an offsettable tax where you only pay on the net difference of input costs minus output costs. So if it were charged on premiums at 20%, insurance companies would become VATable businesses which could then reclaim it on reserves/payouts/reinsurance etc.
Thus, 12% with none of this offsetting allowed (as a "separate" tax) is arguably (broad brush!) roughly equivalent to 20% under VAT rules, except without the huge administrative headache and complex guidance for how to handle things like the timing of VAT for use of reserve funds.
There are quite a few other examples of lower rates to account for lack of offsets or inflationary gains, others I can think of are:
- CGT: charged at a lower rate than income tax in the UK to account for the fact that much of any gain is inflationary. Previously income tax rates were used and indexation tables offset inflation from the real gain. But this was very complex so a lower fudged rate was preferred.
- Dividend Tax: charged at a lower rate than an income tax to account for the fact that the company paying their profits as dividend has already paid corporation tax, with the aim that the combined total of these do not exceed personal income tax rates (Corp+Div = Income+NIC)
DarloRich
Veteran Member
John Steinbeck once said that socialism never took root in America because the poor see themselves not as an exploited proletariat but as temporarily embarrassed millionaires.
My house is a modest 2 bed terrace with a postage stamp of a garden. I am not bothered if some rich fella grouse moor is taxed to chuff. it wont impact me.
Won't it? The whole point of the analysis I attached is that taxes on wealth hit income, and therefore the productive value of the land (Pigouvian land value taxes are at least theoretically different). That has consequential impacts on the wider economy.
Bletchleyite
Veteran Member
The "but save the rich people" argument is being thrown around a lot at the moment, and I don't personally have much time for it. It's really odd how Farage and the likes seem to have got the poor rooting for the rich. It's like anything he says just gets immediately believed.
Tax is a necessity for a functioning society.
But there is positive and negative investment. A property being rented out serves a useful purpose, one not occupied doesn't. So if you were going to do it you could offer relief for where the property was rented out, for instance. We want investment in business growth, not people just buying land and sitting on it.
I suggest you read the paper I linked to - it's nothing to do with "save the rich" and everything to do with the facts around the impact of wealth taxes. From my own experience of dealing with an estate after death, the incentives to pay professionals to mitigate tax are quite strong without getting into landed estates, especially given the value of houses (and those incentives will increase with recent changes to IHT).
Land value taxes are somewhat different, and have a respectable intellectual pedigree from a wide range of viewpoints. If they can be set in a way that ensures that they tax the economic rent on the land, prompting more efficient use of that land, then there may be a good case for them. The house I grew up in is now worth a ridiculous amount because of what's happened to property values in that area; the excess increase in that value might be a legitimate target for tax (though it is also arguable that this is now being paid through IHT).
Unfortunately, the arguments that we're hearing are flavours of "tax the wealthy", with no real concept of how that wealth is comprised, or the impact such a tax might have.
As an aside, it's also worth asking what the environmental implications of crafting taxes for economic efficiency would be - or what the practical impact of introducing specific reliefs might be.
Bletchleyite
Veteran Member
That's CGT. CGT on primary residence would be very difficult, because you need that gain to purchase your next property. However there would be a very strong argument for applying it on inheritance or even where another primary residence property isn't purchased with the proceeds within a couple of years.
But taxes are blunderbusses not sniper rifles and Beatrice would probably be hit by some of the pellets
Cloud Strife
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One thing that I'd suggest is that we should really be moving towards a system where local taxation pays for council services in their entirety, while councils would also have complete freedom to decide how properties are taxed. So, some might want to use a municipal tax (similar to how it's done in Scandinavia), others might want to use the current council tax system, others might want a cadastral tax where it's a certain percentage of the property value.
The rule could be that councils would be required to have a balanced budget within reason, so you might permit them to carry a certain amount of sustainable debt, but with the provision that the councillors would be automatically removed and a new election held if council debt exceeds a certain limit. So, this encourages councils to promote inwards investment, but also requires councillors to be much more responsible for their actions.
So, somewhere like Cornwall where they've got enormous problems with second home ownership would be allowed to tax the living daylights out of such properties.
DarloRich
Veteran Member
Something is going to have to be done and the richest need to be made to pay. It simply isn't realistic to carry on with this protectionism in thier favour while the rest of us struggle. Lets start with a 2% tax on all wealth over £10m and see how we go. That wont impact that many people and should generate us a decent sum.
PS - I am sure I could find an expert to say a wealth tax would be the best thing ever. Gary Stevenson ( not holding out as an expert but certainly an interesting voice) has said much the same
IHT wont impact most people here. £350k limit for a single person. £500k for a married couple. However people THINK it will and that drives a very emotional response.
In the real world: My house is worth, on a good day, c£250k. I cant see how I would EVER have an extra £100k in savings on top of that. it just isn't realistic for most of us in the actual world.
cactustwirly
Established Member
Problem is with taxing wealth, people with 2M have a lot to lose with a 2% tax so will just move it to the Channel Islands/IOM/Switzerland etc where there are no taxes and doesn't do anything for the UK
That's why wealth taxes will never work in practice
I have just paid what the solicitor described as "an eye watering amount" in IHT. That's largely as the result of a house that my parents (policeman and teacher) purchased in 1975 for a song, and where the area is now extremely expensive. Trust me, compared to that tax bill, paying someone to create a tax shelter would have been a very good investment. That's on a small-ish estate (in IHT terms).
Scale that up to those who actually pay most tax, and then start to look at the numbers rather than just go "they can afford it", and you start to see why applying wealth taxes is a) difficult and b) counter-productive.
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It does apply on inheritance, although with exemptions. As for the gain being needed to pay for the next property, that unearned gain would apply throughout the chain - and might have a useful effect on affordability.
Bletchleyite
Veteran Member
One of the difficulties with this is that it's not exactly "levelled up" - poorer places can afford worse services if there isn't a national aspect to it. However I would agree with the general benefit of this, not least that it allows local democracy to be separate from national democracy on local decisions.
I think there's probably a half-way house option there of specific additional grants from national Government based on demographics, though, which keeps it more transparent than the present "block grant" system which basically seems to help national Government cut Council funding while blaming them for the resulting cuts, which is the worst of both worlds.
I am confident that such an idea will not raise significant revenue because "wealth tax" as a general term is ultimately meaningless and is mostly a left-wing slogan that most people don't understand beyond a surface level. Wealth is not just money sitting in a bank vault, much of it is tied up in assets which will already be subject to other taxes such as capital gains or dividend/income taxes in the case of stocks, or property taxes in the case of real estate. There are far better progressive tax options such as the aforementioned land value and more Pigouvian taxes that can provide much greater societal benefits beyond simply increasing government revenue.
Bletchleyite
Veteran Member
Fiscal drag is the potential risk here I guess. When the level was set £350K was a huge amount of money, now plenty of London family homes are worth over that, and give it another 10 years and the average house price will be well over. So people are brought into the tax system who weren't intended to be there. See also stamp duty which was a mansion tax but now applies to almost all sales.
That said I can think of few fairer taxes than IHT. After all an inheritance is not guaranteed - it could get spent on care etc and there be nothing left, so these days an inheritance is mostly a bonus to be spent on holidays and the likes. You get it too late for it to be useful for your first house in most cases, and I'd certainly rather my parents lived to a ripe old age than that I get a couple of hundred thousand quid to blow on a bit of international rail travel and a new car.
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Only if you go up. It would be ridiculous to hit people with CGT when moving to a similarly priced house in another location. That would be another idiotic tax on workforce mobility like stamp duty is. You don't want to tax mobility, you want to ease it - if anything you want to be putting tax relief on relocation costs and the likes (I know there sort of is in the form of tax free commuting for a couple of years, but I mean everything).
In my view the best option is to keep it away from the primary residence where it is being sold to purchase another primary residence, though if that residence is cheaper such that money is left I can see no harm in taxing that.
Since the discussion seems to be moving away from the original subject of VAT on Private Health Insurance, I've created a new thread to specifically discuss the UK tax system and which ones should be implemented, reformed or abolished.
www.railforums.co.uk
What taxes should the UK implement, reform or abolish?
Discussion offset from the thread about Proposed VAT on Private Health Insurance. There is such an overwhelming case for land taxation that I'm shocked prominent left-wing voices haven't tried to make the case for it. Unlike property tax it actually encourages development and also ensures...
www.railforums.co.uk
DarloRich
Veteran Member
Hard to take your 47 room mansion to Jersey..................
The bands need to change to reflect the reality of the current world because IHT is ABSOLUTLY only a tax the richest should pay. No one in my family have ever paid IHT.
I don't think we're far apart - though I'm wary of adding further complications if at all possible.
No pension? In order to have a decent payout, you need to have accumulated a fair pile.
Hence the noise when the government announced unspent pensions would be brought into the scope of IHT.
An escalator, please, or maybe a crane!Do your require the use of a ladder to assist with dismounting your rather tall steed?
I think that a major issue with the derelict brownfield sites is the cost of remediation(removal of pollution particularly, but also upgrading of historical service infrastructure) - it is often cheaper to build on virgin land than brownfield, so until a shortage of virgin land occurs and house prices are pushed that much higher (or Govt. grants become available) , developing the brownfield sites is uneconomic.
I don't think there is, generally, any shortage of commercial land (depending on its proposed use obviously). In the case of house building, existing house owners don't want prices to fall (as they may go into negative equity and/or reduce their mobility unless the prices were to fall evenly across the whole country), and Local Govt. does not have the capital available to build social housing, even if the land came free. (Many Local Authorities have considerable holdings of derelict land too.)
So you might think, but any tax like this could easily end up doing so.
I have a fundamental objection to any tax (or call it by what it is - confiscation) based on the value of assets held, be it cash in the bank or property owned, or any tax which is deliberately designed to substantially reduce the value of any of those assets. Funnily enough it is always those who haven't got these assets who propose such measures! (or if they have some, carefully craft the measures to ensure they won't be affected).
In a few days of me being away, this thread has spawned another and I can't keep up......
Tetchytyke
Veteran Member
It isn't uneconomic. It is less profitable for the house builders, yes, but that isn't the same thing as it being unprofitable.
Sadly Rachel Reeves a) is about as sharp as a spoon and b) is completely in hock to house builders. So instead anyone who objects to green land being concreted over is a "NIMBY". Unless they're called Rachel Reeves and are objecting to the expansion of Leeds/Bradford Airport, of course, in which case they merely have legitimate concerns.
In general I'd agree that the tax should only be on the income generated from those assets. As Dan Neidle shows, otherwise you end up with people paying more tax than they earn from the asset.
However I think we do need to look much more closely at how we are defining income.
If someone is land-banking then they won't be getting an income from the land. However we can quite easily apply a deemed income to any land held, and tax on the basis of that deemed income. This is precisely what happens when you claim welfare benefits- if you have assets you are deemed to have an income from them, and your benefit is calculated on the basis that you are drawing down this income.
I'd also disallow the costs of finance when calculating the income. We started down this road when private landlords could no longer offset the cost of any mortgage interest against income from rental properties. This should be expanded further.
Anyway, getting back to VAT on private health payments. It's a stupid idea, but not for the reason many people argue. It's a stupid idea because once the output is VAT chargeable then the input VAT can be offset against it. VAT on private health care would very likely reduce our tax take.
I've rarely seen a clearer demonstration of fitting the facts to suit the interpretation. These are precisely circumstances where an ongoing charge could easily involve tax being disproportionate to income. Land that cannot be used does not generate an income. Financing costs for a business are no less real for not being bricks and mortar.
Tetchytyke
Veteran Member
Cannot be used, or the owner has chosen not to use it?
Deemed income is seen as good enough for welfare benefits. They treat you as having income from your assets even if you don't. So why not for taxation?
I would suggest in many cases of land banking, cannot. If the land is held, but the permissions required to derive an income are not in place, it is not generating an income.
That is different from an individual in receipt of benefits. If someone holds financial assets, and is claiming benefits, I can see an argument for insisting that they use their own wealth to support themselves rather than relying on taxpayer funded benefits, and that deemed income might be part of achieving that.
But, accepting there will be edge cases in both directions, these examples confuse cost and opportunity cost - a frequent sleight of hand in discussions about the amount of tax paid.
Tetchytyke
Veteran Member
Again, it comes down to why those permissions are not in place.
Are they not in place because planning permission was rejected? Or are they not in place because the landowner is content to sit on the land with it doing nothing until such time as it is profitable for them to apply for the planning permission?
With land-banking the latter is common. Persimmon and the likes will sit on the land for years until it suits them to apply for planning- and then they will whine and moan about how long the planning process takes.
I don't think there's anything wrong with the government using taxation as a lever to make people who are land-banking either do something or get off the pot.
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