Sunday, September 26, 2004

No wonder we revolted. Talk about 'nothing more permanent than a temporary tax'.  From the (London) Telegraph:                     ... A far better and more genuine reform would be to abolish stamp duty, the most wicked tax in a fiercely competitive field. When William III introduced this levy on legal documents in 1694, it looked like a perfect tax, which is to say low, compulsory, and temporary. Parliament passed an Act "Granting to their Majesties several duties on Vellum, Parchment and paper for four years towards carrying on the war against France". But it was so easy to collect that stamp duty soon spread to post-horses, hats, hair powder, newspapers and medicine labels. When it was imposed on tea imports in America, it helped ignite a rebellion that cost us the loyalty of our second-best colony (after India). Now stamp duty is only levied on share trading and house and land purchases. But it is steadily becoming just as politically explosive as it was when those brave men tipped bundles of tea into Boston harbour. For its perverse effects are being exposed, first by the decline in house prices, and second by the weakness of the stock market. According to the Halifax, house prices dropped for the first time in four years in August and, in its latest minutes, the Monetary Policy Committee of the Bank of England said: "An increasing weight of evidence suggests that the housing market might be cooling, with a range of indicators pointing in the same direction. " But the argument for the penal level of stamp duty on house purchases (which, thanks to Mr Brown's stealthy increases, is three per cent on a house worth over a quarter of a million pounds and four per cent on one worth half a million or more) is that soaring property prices will, in effect, pay the duty for you. It therefore follows that a declining property market will expose just how hateful this tax is. For it falls heavily on the very class politicians should be encouraging: young couples hoping to set up a home together. It is the only tax that must be paid by borrowing; or, alternatively, a raid into a couple's modest capital. Parents and grandparents frequently have to pass the hat round to help. Those who want to climb the property ladder, by moving several times, get clobbered repeatedly. It distorts prices. And it penalises movement in the labour force. According to his own forecasts, Mr Brown will soon be raising more than £9 billion from stamp duty, twice the amount when he took office. The situation is no better in the stock market. Stamp duty on share trading in Britain, at 0.5 per cent, is the highest in the developed world. It is mostly paid by pension funds, for other professional investors are adept at avoiding this absurd impost by trading derivatives, on which no stamp duty is payable. This growth in avoidance means stamp duty revenues from share trading are now falling well short of Treasury expectations. Mr Letwin must say it loud, and say it clear: the Tories should promise to abolish stamp duty completely and finally to close the Stamp Office 307 years after it was first meant to be shut. If William III could see how his baby has mutated into such a monster, I am sure he would approve. Stamp duty should head Letwin's list     Jackpotzrebie comment []8:21:17 PM   trackback []