Higher stamp duty puts damper on luxury market

Sales of luxury homes in London have dropped following the stamp duty changes in March. The expected increases in revenue are not materialising. Sales of homes worth more than £2m – the threshold at which the levy rises from 5 to 7 per cent – are down by 24 per cent in the four months since the budget. Sales which would have been at £2m and a bit have now been renegotiated to a bit under, according to one London estate agent.

Why is this a surprise? This is what happens when unprincipled taxes are applied. What is the principle behind stamp duty? Why should people become liable for tax when they sell a property? There is no justification for this charge other than to cover Land Registry costs. Here also is a good illustration of the tax incidence principle. The buyer pays, but the incidence of this tax is on the seller. To raise increase stamp duty was to compound the idiocy and demonstrated the Chancellor’s economic illiteracy. It must make also one question the wisdom of the Office for Budget Responsibility as well, who approved the changes.
 
FT article