Residential Property Tax Now Inevitable?
Is there anything that can be said in favour of residental property tax? Anyone who bought a property in the last 6 years will have paid substantial amounts of stamp duty. Recent buyers may soon be faced with the prospect of having to pay an annual amount on top of the stamp duty already paid, for a property which may be in negative equity for some time to come.
On a purely economic basis, residential property tax makes more sense than stamp duty. RPT is an annual income for the state coffers while stamp duty is dependent on the state of the property market. While the property market boomed, the stamp duty funds flooded into state coffers but now the flow has been reduced to a trickle.
From a financial planning point of view, the steady flow of an annual payment is much more preferable to the volatile nature of the property market.
Stamp duty also acts as a deterrant to moving house. The person buying your house will have to pay a substantial amount of money up front and the same applies to you if you are also buying second hand. In the current economic climate, if someone has to move to take up a new job, the economics involved may prevent the move happening and a job opportunity may be lost.
If RPT is to be introduced, some form of allowance would need to be made to people who have paid stamp duty in recent years. This could be something like a sliding relief whereby if stamp duty was paid in the past year a 100% relief would apply. Relief rates of 90%, 80%, 70% etc would apply for older stamp duty transactions.
RPT will be a deeply unpopular tax, but it's hard to see the government passing up the chance of getting much needed funds into the state coffers.
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