Is PWT APT for the UK?
Wednesday 26th June 2024
What?! I hear you say.
The French have a Property Wealth Tax (PWT) which - being French - they call IFI (Impôt sur la Fortune Immobilière).
I am not trying to be difficult, though it does come naturally - but my preferred name for this awful tithe is - Annual Property Tax (APT).
The reason why I want to call it an Annual Property Tax is because that is what it would be if I were King - it is not to do with ‘wealth’ which is a subjective and potentially antagonistic term.
We need:
a) an overhaul of property taxes
b) a fluid property market unsullied by distorting transaction taxes
c) an alternative to Council Tax
In an ideal world we would abolish Council Tax altogether.
However, that is too simplistic.
Local Authorities need to be accountable to their voters and Council Tax does at least link the voter to the taxes they pay locally.
Political history Wonks see the paragraph at the end.*
Regrettably, APT may have to be on top of Council Tax.
Stamp Duty needs to be abolished or at a much lesser rate – across the board to compensate for APT.
French APT is on the owner of any property - with bands of marginal tax rates. Note the rate is in Euros! Thus:
Band of value Rate of tax
Up to 800,000€ 0%
800,001 € to 1,300,000 € 0.5%
1,300,001 € to 2,570,000 € 0.7%
2,570,001 € to 5,000,000 € 1%
5,000,001 € to 10,000,000 € 1.25%
Above 10,000,000 € 1.5%
So, an individual owning property with a total value of - say €2.2m would pay a tax of €8,800.
This is an acceptable sum PROVIDED the Council Tax and Stamp Duty are much reduced.
The problem with all of this is that a Labour government in particular, is likely to abuse the situation. Although this latest bunch of Tories are just as bad.
Treasury fiddlers will simply make APT another way to raise revenue, ignoring or not recognising, that to over-tax an activity reduces the tax take.
However, the huge upside of APT is that it drives people who hold a property unnecessarily, or unproductively, to pay tax for their lack of focus.
I have a French client who had a large estate but who through lack of income has had to sell off cottages and land to pay the APT and as a consequence, is left only with the lateral chateau. Oh Les Pauvres !
It sounds brutal but if an older person is still living in large house, beyond retirement, and finding the APT tricky, they might downsize and release it for a younger, bigger family -lessening their own tax and releasing cash for retirement.
Or - it will make people with second homes think very carefully about their real need for that country retreat.
Either which way, I now prefer the concept of an APT to Council Tax and Stamp Duty.
What do you think?
Until next time…
PB
*We need to remember that Margaret Thatcher’s main original reason for bringing in the Poll Tax - now Council Tax - instead of rates, was to try to tackle the problem of the ‘Militant’ wing of the Labour Party.
These left-wing nutters had taken hold of local councils and were deliberately bankrupting themselves to help bring down her government and spawn Communism in the UK. Derek Hatton in Liverpool and Red Ken Livingstone in London being examples who come to mind.
Maggie wanted to bring electoral accountability to these profligate local councils by replacing the old rates system with a local tax which was collected from all voters, be they owners or tenants.
We forget but Militant politics was a real thing in the 80’s. Thankfully, Corbyn failed to successfully resurrect it.
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