Stamp Duty on the purchase of homes should be abolished, Britain’s leading economic think tank has said.
The Institute for Fiscal Studies said that Stamp Duty is an ‘obviously stupid’ tax which stopped people from moving home because of the huge tax bill associated with buying a new property.
It wants Stamp Duty to be completely scrapped as the first measure in a wholesale reform of Britain’s current taxation system, which it branded a ‘mess’.
Paul Johnson, director of the IFS, said there was “little about the UK tax system which looks like it was deliberately designed”.
He said of Stamp Duty that it is a bad tax because it reduces the number of transactions.
The IFS call will have the enthusiastic backing of developers and estate agents, with the property industry long calling for a reform of Stamp Duty which they say distorts the market.
It is currently payable on all homes costing £125,000 and above (or £250,000 and above for first-time buyers). The highest rate is now 5% on £1m-plus homes.
In addition to scrapping Stamp Duty, the IFS has proposed wholesale changes to Council Tax, land taxes, rental property taxes and to VAT, fuel duty and income tax.
It wants to see Council Tax replaced with a new tax, where people would pay a percentage of the value of the property they live in. All homes would have to be revalued, as Council Tax is based on 1991 valuations – something which the Institute described as ‘ridiculous’.
It also wants to see income tax and National Insurance merged as one, while inheritance tax should be changed so that the chief beneficiary pays tax, rather than it being a tax on the dead person’s estate.
The Institute also called for VAT to apply to all purchases, with current exemptions such as food and children’s clothing abolished.
A spokesperson for the Treasury said: “The Government has embarked on a programme of ambitious reforms of the tax system to address the instability of recent years.
“These are based on clear principles to support growth, reward work, reduce complexity and increase fairness.”