Azara Blog: Tories introduce tax gimmicks

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Date published: 2007/10/01

The BBC says:

The threshold for inheritance tax would rise from £300,000 to £1m under a Conservative government, George Osborne has told the party's conference.

Stamp duty for first-time buyers on homes worth up to £250,000 would be scrapped, the shadow chancellor added.

The cuts would be paid for with a fee charged to business people who register abroad for tax purposes.

The Lib Dems accused him of making "unfunded commitments" while Labour said his calculations were wrong.

Mr Osborne told the Conservative party conference in Blackpool that the £3.1bn cost of increasing the inheritance tax threshold and the £400m bill for scrapping stamp duty would be funded by imposing a £25,000 per year charge for non-domicile taxpayers.

There are between 150,000 and 200,000 people who live in this country but who do not pay tax on the money they make abroad, he said.
...
He said his party wanted to help "people whose only crime in the eyes of the taxman is that instead of spending their savings on themselves they want to pass something on to their families".

It's hard to take the Tories seriously. They are committing 3.5 billion pounds of spending, and hoping and praying they can make that much in extra tax by screwing some rich people. But there is no indication at all that the rich people are going to accept this tax, or instead just leave the country, or otherwise avoid this tax (by admitting to small amounts of offshore income). This is the kind of silliness you expect from a backwards socialist party, not an allegedly serious conservative one.

And if it is ok to have a million pounds in assets before you pay inheritance tax, then why not two million, or more, pounds? Or is it that once you get above this arbitrary magic threshold you suddenly are committing a "crime in the eyes of the taxman"? The real problem with inheritance tax is not that the arbitrary threshold is this or that level, but that married (or "civil partnered") people escape the tax and other people do not.

The stamp duty give-away is even worse. What is a "first-time buyer"? Presumably if you are a banker who has worked in the States in your twenties and then you come back to the UK to buy your first UK home, then the Tories are happy to give you back your stamp duty because you are obviously a deserving cause. Or if one person in a couple has already bought a home and not the second, then needless to say games will be played to make sure they are eligible for the give-away. And it means that people who have never owned a home will in some cases be able to leapfrog on the property ladder people who have owned a home.

But the worst thing about the stamp duty give-away is that it does not address the fundamental issue with housing in the UK, namely that demand outstrips supply. Throwing money at one small part of the population will slightly increase the demand but it will not increase the supply. The Tories are one of the dreadful organisations that have provided obstacles to increasing the supply of housing. They are part of the problem, they (and their gimmicks) are not part of the solution.

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