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Review calls for property tax shake-up

Thursday, 15 September 2011 1:44 PM

An independent review of the UK taxation system has concluded that the taxation of housing is in need of urgent reform.

The Mirrlees Review published by the influential think-tank Institute for Fiscal Studies (IFS) says that stamp duty is among the most inefficient and damaging of all taxes and that the council tax is out of date and unnecessarily regressive.

It recommends the abolition of stamp duty and the reform of the council tax so that payments are based on up to date values and are fully proportional to the value of the home.

The review calls the reformed council tax a housing service tax, which would effectively stand in place of VAT for housing.

It says that stamp duty defies basic economic principles by taxing transactions and income tax and capital gains tax create a bias against the rental market in favour of owner-occupation and that it is “absurd” that council tax bills are still based on valuations from 1991.

The review concludes: “Over time, this arrangement will come to be seen as more and more untenable. At some point, some government will have to grasp the challenge of making the case for intelligent reform.”

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