Stamp duty is one of the worst designed and most damaging taxes and serves as a drag on the housing market, according to the Institute for Fiscal Studies.
In a speech to the Chartered Tax Adviser annual conference last night, IFS director Paul Johnson said although this Government and the previous Labour administration had made some improvements to the tax system, other changes made taxes “more complicated, less efficient and less transparent”.
He said: “The last government and this one raised stamp duty rates time and time again. This is one of the worst designed and most damaging of all taxes, yet revenues from it are due to hit £15bn within just a few years. At the extreme a £1 increase in sale price can now trigger an additional £40,000 tax bill. The tax helps to gum up the entire property market.”
He also criticised:
- The effective 60 per cent income tax rate for people earning between £100,000 and £120,000 due to the loss of the personal allowance. “It’s hard to make much sense of that,” he said.
- The fact that some elements of income tax are no longer adjusted for inflation but are instead set in cash terms, meaning more people are pulled into higher rates.
- That Governments of all stripes have cut income tax while increasing national insurance contributions because it is “politically easier”.
- The continued failure to reform the “increasing absurd” council taxation away from using bands based on 1992 prices.
- The “dramatic” reduction in income tax allowances for pensions contributions brought about by the Coalition’s cut in the annual personal allowance.
- The “further complexity” that would result from Labour’s proposal to limit pensions tax relief to 20 per cent for those earning above £150,000.
He praised the consistency of the coalition’s policies of cutting corporation tax to 20 per cent and raising the income tax personal allowance to £10,500, saying “these two particular policies stand out among the complexity and uncertainty created elsewhere”.
Johnson reserved special criticism for the last Labour government. He attacked the “chaos” around the introduction and abolition of the 10p income tax and capital gains tax bands and the introduction and abolition of a 0 per cent corporation tax band for low-profit firms.
He says: “The last Government could fill its own hall of shame with damaging tax policy.”