The case for transaction taxes

James Mirrlees, the chair of the IFS review on taxation, is reporting as criticising the Scottish Government’s proposal for a property transaction tax. His review in 2010 described property transactions taxes as ‘highly inefficient’ and argued that there should be an annual tax on housing services, based on up to date valuation of property. That’s all very well, but no such valuations exist; the current information is more than twenty years out of date. The problem faced by the current Scottish Government, then, is that there is no mechanism in place to do what Mirrlees recommends, and it will take years to create it.

The Scottish Government is inheriting a complex, rather obscure system. For example, there are some twenty-five different reliefs; three or four do all the heavy lifting, and about 15 are hardly claimed at all by anyone, but by the same token those reliefs don’t actually cost anything, and the Government can be sure that if they abolish them, there will eventually be protests. The system makes little sense, but it more or less works (largely because all property transfers are registered and solicitors enforce it). That’s an argument for incremental change at best.

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