The ECB has a new working paper on the sources of windfalls and shortfalls in government revenue: the paper is available here.
The ECB has a new working paper on the sources of windfalls and shortfalls in government revenue: the paper is available here.
9 replies on “Government Revenue Windfalls and Shortfalls”
@Philip
My own reading of the historical record, with hindsight, is that Michael McDowell was correct in his widely-maligned view that the windfall revenues from stamp duty were actually a problem that needed to be addressed. He is still widely criticised for making that statement, particularly by people in the property industry, but with hindsight he is completely vindicated.
The abolition of all stamp duties was recommended, for cogent reasons, by the first Commission on Taxation in the mid-1980s, so no medal for McDowell on this one. He stopped the Bertiebowl though!
I’m nervous of removing stamp duty in terms of speculative flipping (of both residential and commercial properties), but I suppose an adjustment of capital gains tax (i.e. introducing a window in which CGT is liable on PPR sales, or a higher rate of CGT…).
@ yoganmahew
I think now is the time to move to CGT on PPR.
Reduce the Stamp to 2.5%.
Allow some transition relief (5 years?) for stamp recently paid.
It the government doesn’t take the opportunity now it will become dependent on the stamp again, even at lower property prices.
@ yoganmahew
I have, of course, no evidence for this but I think removing the stamp on PPR could provide stimulus to the residential market. I don’t think there would be too much flipping, there isn’t sufficient credit available. Sound money might move in residential property if transaction costs were reduced.
That move could lead to activity beyond the transaction itself. Surely a good thing?
And the purchasers knows at the outset that gains would be subject to CGT.
Nobody in their right mind would buy property coming up to another budget with the abolition of stamp duty a real possibility (yet again and again). If it is not got rid of they will just wait, purchasers have plenty of time on their hands. The move would provide a stimulus but would be an important psychological move. It was always a fundamentally flawed tax especially as it applies to social mobility.
It is not a flawed tax. It does not distort any market. Credit multipliers distorted the market!
Calling for abolition of taxes is an example of magic economics. Reaganomics has been exploded nearly everywhere but on this blog?
The economy was flawed and the government was lazy. Not balancing the loose money with tighter fiscal provisions was clearly wrong. Property is an issue for every resident simply because it was a store of illusory wealth. If sold, another has to be obtained. No real gain unless emigrating. Now residents must live with declining income and declining “wealth”.
Vote better the next time!
@ Pat Donnelly
Stamp duty tax itself is multiplied by the credit multipliers and as most people borrow the money to pay the stamp duty they end paying for the “stamp duty” over 20 to 35 years. If that not distortion? Therefore it is not just a “one off” tax at the point of purchase.
That is not exactly the mechanism of the property bubble. Big credit multipliers become possible because of low interest rates. However, what drove prices upwards so that yields are lower than interest rates is tax policy, specifically mortgage interest relief, and to a lesser extent, capital allowances.
Stamp duty was certainly a damper on the rising property market, but it acts as a fully-fledged fire extinguisher on a depressed property market.