Property investors should pay more tax, says OECD

by Property 118

8:36 AM, 17th December 2010
About 10 years ago

Property investors should pay more tax, says OECD

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Property investors should pay more tax, says OECD

Property industry insiders are fuming at a report by the Organisation for Economic Co-operation and Development (OECD) suggesting that the UK should implement more taxes on property owners to stabilise the boom-and-bust housing market.Outside the rarefied atmosphere of economists and cross-border tax experts, most people do not know much about the OECED. 

Here’s a look at the report calling for more property taxes and the OECD. 

What is the OECD? 

It’s an international think-tank that takes government data and looks at ways of improving the standards of living for member countries. 

Who belongs to the OECD? 

The OECD has 34 member states, covering most of Europe, including the UK and other leading economies worldwide, like the USA and Japan.

What is the OECD saying about property tax in the UK? 

The report Choosing a Broad Base – Low Rate Approach to Taxation suggests that countries should raise more tax against property because to do so is more efficient, more stable and harder to evade than other taxes. 

What has upset everyone about the report? 

Basically, the OECD claims property investors and owners receive preferential tax treatment, and this has led to the housing market sucking in investment from other sectors that distorts markets. 

“Owner-occupied housing has a favourable tax treatment relative to other forms of investment in many OECD countries through reduced tax rates or exemption for imputed rental income, mortgage interest payment deductibility and exemptions from capital gains tax,” said the OECD. 

The OECD claims a stable housing market is needed to improve the tax system 

It also adds that many OECD countries use outdated valuation methods and a proper valuation system is crucial to effective property taxation. 

“The market value of real property is not following a stable trend over time, as the recent housing bubble and corresponding collapse in prices have demonstrated in many countries. This creates an additional difficulty in using the market value of real property as a taxable base,” said the OECD report. 

Does this mean taxes will go up?

Not at the moment. The document is a discussion document and has no power in UK law. The likelihood is several countries would have to work together to impose a new property-based tax system, like the European Union. Chances are nothing will change.

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