Is there an award for economically illiterate ideas?

michaels

Because I have a nomination:
http://www.bbc.co.uk/news/business-39139128

Consider a buyer looking at a 200k house and having to find 1500 in stamp duty.

Same buyer can not only now afford to pay 201500 for the house but in fact probably more as the stamp duty amount can go to the deposit and because the purchase price of the property is higher their loan-to-value is improved so with a bigger deposit and better loan to value perhaps they can now afford a house costing 205k.

Now all buyers are able to afford to pay more, with no increase in supply that just means the available houses get bid up so that supply and demand remain in balance. So the buyer avoids having to pay 1500 up front as stamp duty at the price of having to borrow another 3500 just to buy the same house....

antrobus

michaels wrote: »

Because I have a nomination:
http://www.bbc.co.uk/news/business-39139128

.

According to Andrew McPhillips, the Yorkshire's chief economist;

Levying the charge against sellers rather than buyers will help to reduce costs for first-time buyers, helping more people to get on the property ladder. It would also help those moving up the property ladder, enabling them to move to a more suitable property and potentially freeing up smaller homes for first-time buyers to purchase.

That's what I'd call bad economics. After all, the sellers of things that are not houses have to pay the VAT charge, but that doesn't make things cheaper for the buyers. It's not like sellers can't work out that 1/6th of the sale price has to be handed over to HMRC and adjust it accordingly.

Stamp duty is a transaction tax, who ends up coughing it up, depends on who is keenest to do the transaction. Making the sellers liable for stamp duty would just mean they stick it on the asking price.

P.S. I had a look for McPhillips's CV. Apparently he previously worked as an economist at HM Treasury. Thank God he's not there anymore. He studied Economics at Leeds Beckett University. Hmmph. That's a jumped up polytechnic.
http://www.ybs.co.uk/media-centre/spokespeople.html

zagubov

Anything that helps buyers rather than sellers is a good idea. After all, we buy houses more often than we sell them.

kinger101

The usual award is being appointed (shadow) chancellor in the Labour Party.

mrginge

I'm certain that the chief execs of the major house builders will be fully behind this absolute pile of twaddle.

System

antrobus wrote: »

. After all, the sellers of things that are not houses have to pay the VAT charge,

No they don't. VAT is added to the sale price and the buyer pays it.

The seller has to remit the VAT element to HMRC, less any allowable VAT he has himself incurred,

HAMISH_MCTAVISH

michaels wrote: »

Is there an award for economically illiterate ideas?

Yes.

And this year's winner is.....

Brexit!

MyOnlyPost

So as a homeowner who paid stamp duty on the purchase of your home you may in the future be required to pay stamp duty again when you sell. I can see that going down well with middle England.

Stamp duty should be abolished altogether. It is absurd how much the governemnt wants because you dare to want a better home for your family.

antrobus

Clifford_Pope wrote: »

No they don't. VAT is added to the sale price and the buyer pays it.

The seller has to remit the VAT element to HMRC, less any allowable VAT he has himself incurred,

Yes, that is exactly the point I was making. It is the seller who has the legal liability to pay the VAT to HMRC, but it is the buyer who bears the cost. So if the seller of a house has the legal liability to pay stamp duty to HMRC, who is it that bears the cost?

PS. 'remit' and 'pay' are synonyms.:)

westernpromise

Right, so if I'm downsizing from a £1.5 million house to a £1 million place I now get to pay the stamp duty on a £1.5 million place. Genius! Instead of a transaction tax of £44k on top of my moving costs I get to pay £94k on top of my moving costs - taking it from a 200% tax to a 450% tax. Way to get me to sell!

SouthLondonUser

MyOnlyPost wrote: »

Stamp duty should be abolished altogether. It is absurd how much the governemnt wants because you dare to want a better home for your family.

As much as I would have loved not to pay stamp duty on my property, I disagree with you.
Properties are easy to tax because they cannot be hidden away; and, well, the money to pay for the NHS and all the other services we hold dear must come from somewhere.
Zero stamp duty would not be a good idea for two reasons: it would not be fair because it would reduce tax revenues too much, benefiting those who can afford to buy a property, to the detriment of those who cannot; and it would risk exacerbating housing bubbles, because one of the impacts of transaction costs like stamp duty is to disincentive excessive short-termism. In other words, it terrifies me to think how much worse the housing bubble would have become without stamp duty.