Debate Magazine

Tax Incidence

Posted on the 10 July 2020 by Markwadsworth @Mark_Wadsworth

from Yahoo Finance:
[The SDLT holiday] will reduce many buyers’ tax bills. The chancellor said the changes meant almost nine in 10 buyers will pay no stamp duty land tax (SDLT) at all on transactions.
Treasury analysis suggests buyers would save £4,500 on the average property purchase, though analysis by estate agent Barrow and Forester indicated lower savings of £2,465 in England. But the reforms are mainly intended to drive additional sales in the property market, as a significant part of Britain’s economy...
UK housebuilders’ share prices have been rising all week after the plans were first reported over the weekend, with shares in Persimmon (PSN.L) up almost 10% since last Friday.... Several experts warned the temporary nature of the measures mean the tax cuts may have unintended consequences, however.
Observers pointed out transactions and prices may spike as buyers rush to complete before the holiday expires next March, followed by a sudden drop. In the short term, buyers may save money on stamp duty, but if tax cuts start pushing up demand they may face higher asking prices.

SDLT is, taken in isolation, a dreadful tax, but it is a bit like a lump-sum LVT paid in advance, so not the worst tax. (The same goes for Inheritance Tax - it is like a lump-sum LVT paid in arrears. Same goes for Council Tax - it is like a very low level LVT-cum-Poll Tax payable annually. Between them SDLT and IHT raise 50% as much as Council Tax, so why they don't just merge those two into an enhanced Council Tax is an enduring mystery to me.)
But the fact that the share prices of major Tory party donors land bankers home builders have risen so sharply is a bit of a clue that the 'observers' are correct - the SDLT cut will benefit sellers rather than buyers, even though it is the buyer who legally has to pay it.

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