UK property tax burden is fourth heaviest in OECD
The UK’s property tax burden is the fourth heaviest in the OECD’s list of 38 countries and it is more than double the average across the list of advanced economies.
In a report on government revenue levels across most of the world’s largest economies, the OECD said the UK’s taxes on property as a percentage of total intake came behind just Israel, South Korea and the US.
As a percentage of GDP, it was the highest in the OECD.
Property taxes including business rates and the stamp duty are the scourge of top growth-focused economists, with analysts claiming that property purchases and the cost of building were too expensive in the country.
The UK’s average property tax burden as a proportion of intake amounted to 10.5 per cent while the OECD average was just 5.1 per cent.
The report published on Tuesday was based on provisional data for 2024 and did not cover Rachel Reeves’ last Budget where she added an annual surcharge on homes worth more than £2m, raising some £400m by 2030.
It also did not cover wide-ranging reforms to business rates, widely criticised by pubs and restaurants as piling extra costs on the fledgling hospitality sector, nor a sweep of tax hikes on household income.
Kristian Niemietz, editorial director at the Institute of Economic Affairs, said: “Britain does not just raise more revenue from property taxes than most other OECD countries. Britain also raises more revenue from property taxes alone than Spain, Norway and Switzerland (the only three European countries that still have wealth taxes) raise from property and wealth taxes taken together.”
He added that some left-wingers’ “obsession with wealth taxes” was “absurd” in this context.
The Centre for British Progress’ David Lawrence said took aim at the form of property taxation in the UK, specifically stamp duty, that is “bad for growth”.
“It gums up the property market by taxing each sale, meaning that many properties don’t end up the market at all.
“This inflates housing cost and means that workers can’t afford to move to better job opportunities, while others cannot afford to move out and downsize. We need to move towards a more efficient form of property taxation, such as an annual proportional tax on property value.””
Brits pay more income tax than the French
Income taxes and other levies on individuals as a share of total revenue were higher for Britons than they were for Germans, Spaniards and French people, the OECD also revealed.
The income tax burden is only higher in the US, New Zealand, Canada, Iceland and Denmark. As a share of GDP, however, the UK ranked above the US.
By comparison, value added taxes on goods and services was among the lowest across the OECD while levies on businesses also fell below the wider average.
The overall tax burden as a proportion of the size of the economy was marginally higher in the UK than across the OECD as it ranked in 22nd place in terms of overall government revenue as a share of GDP, according to the Paris-based think tank.
The tax burden in the likes of France, Italy, Germany and Spain remains higher than in the UK.
The report also uncovered how the overall tax burden across major economies has steadily risen over the course of the century, with the UK’s tax burden rising from 32.7 per cent to a high of 35.2 per cent in 2022.
The latest figure stood at 34.4 per cent but the actual burden is expected to be much higher, with the Office for Budget Responsibility (OBR) saying after the Budget that national taxes as a share of GDP was set to rise from 34.7 per cent in 2025 to a “historic high” of 38.3 per cent in 2031.