Property taxes send UK to ‘second-bottom’ of global rankings
The UK is second-bottom of global competitiveness rankings for property taxes, fresh analysis has shown, undermining Chancellor Rachel Reeves’ ambition to “back the builders, not the blockers”.
The Tax Foundation’s International Tax Competitiveness Index placed the UK at 32nd out of 38 in a damning indictment of HMRC’s complicated rules and a higher burden preventing businesses from growing.
Further analysis by the Adam Smith Institute has shown that the UK places 37th in competitiveness for property taxes, above only Italy.
Researchers said the UK had suffered from the second-lowest average rate of gross fixed capital formation as a share of GDP in the OECD, reflecting struggles to pile cash into new buildings and infrastructure.
The ASI said that UK’s property taxes as a share of the capital stock was the highest in the OECD at 2.6 per cent.
The average across the world’s most advanced economies is 0.4 per cent.
UK firms are also only able to write off 39 per cent of the cost of new industrial buildings off their taxes, which is lower than an OECD-wide average of 49 per cent, according to analysis.
“This makes new construction much less attractive in Britain and contributes to the overall underperformance of British corporation tax by distorting decision making,” ASI economists said.
“The UK is also an international outlier for not allowing any capital allowances for new residential buildings in corporate ownership.”
Stride hits out at ‘terrible tax’
Property taxes are set to be central to the upcoming Budget. One of the options being considered by the Treasury is allowing stamp duty to be paid in instalments.
The Tories have formally vowed to scrap stamp duty on primary residences if they are re-elected, making up tax losses through multi-billion pound savings to Whitehall costs and the welfare bill.
Responding to the ASI’s report on the Tax Foundation, Shadow Chancellor Mel Stride said the “wrong things” in the UK economy were being taxed.
“We need a tax system that maximises growth and productivity,” Stride said.
“Stamp Duty is a terrible tax, but people wanting to get onto the property ladder or move house are paying even more this year than last. Abolishing stamp duty on main homes would free up our housing market and create a stronger, more competitive economy.”
Alex Mengden, global tax policy analyst at the Tax Foundation, said: “Stamp duty land tax is a tax that belongs in the 17th century. It severely distorts the allocation of property and raises the cost of capital for building, while raising little revenue.”
“As the Adam Smith Institute’s report highlights, these distortive taxes layer on top of an already restrictive planning system.”