Thinktank Recommends Tax Grab With New Property CGT
Since the escalating costs of support to the nation throughout the pandemic, as well as the stamp duty holiday announced by Chancellor Rishi Sunak, many have wondered how the government will make up the loss.
The Social Market Foundation (SMF), a think tank, has suggested a new tax on the increase in the value of a property on sale, will ensure the costs of the pandemic are recovered and that younger people are not unfairly affected.
Set up by Lord Danny Finkelstein, a Conservative peer, the foundation has stated that “without radical action to raise significant extra tax, Britain faces an unsustainable national debt and stagnant growth that will blight the lives of future generations.”
The Treasury needs to raise £421 billion over the next 25 years, and the think tank feels by imposing a new Capital Gains Tax (CGT) on property will not only help raise the money needed, but possibly also scrap stamp duty.
The proposed new Property CGT could be set at 10% of the increase in the value of property since it was last sold. Michael Johnson, who wrote the report, says that the fairest place for the Treasury to levy new taxes is unearned gains on residential property.
The SMF has, stated that over the next 25 years a new tax on any gain in property value will raise the Treasury an estimated £629 billion. The foundation also feels that a tax on unearned property gains, will be a better target as a new tax rather than worker’s earned incomes.
The people likely to be affected by the changes will be those that are older, who own most of Britain’s property, as well as those who inherit property and plan to sell it.
Johnson estimates that the average pensioner household has a net property wealth of £272,900, over 5 times the average for those aged between 25 and 34, currently £53,700.
“The vast £5 trillion pool of equity in homes presents the Treasury with an opportunity to pay for the economic damage done by Coronavirus, through the introduction of a capital gains tax on the unearned gains in the value of property” says Johnson.
“The alternative is that the young will have to pay for a debt-laden future. They are already hugely disadvantaged, financially, relative to older generations. Asking them to bear the burden of this crisis in the decades ahead would be unfair and unreasonable.”
James Kirkup, Director of the Social Market Foundation, adds:
“These reforms are bold, far-reaching and could be politically controversial: the older voters who own most British property are a powerful group. But the scale of the Coronavirus crisis and the unprecedented outlook for the public finances mean that responsible politicians of all parties must be prepared to embrace new ideas and take bold action.
“Failure to act risks severe economic and social harm. A post-crisis era where the costs of the crisis fall more heavily on the young than the old could strain the social contract between the generations to breaking point.”