Scots Ponder Amendments To Property Sales Tax
04 June 2013
Posted by: Author: Amanda Banks
Author: Amanda Banks
Scotland's Finance Minister John Swinney has expressed opposition to proposed amendments to the planned Land and Buildings Transaction Tax (LBTT) which would link the rate at which the tax is set to energy efficiency.
The proposals were put forward by Malcolm Chisholm MSP during a meeting of the Scottish Parliament's Finance Committee. Chisholm argued that a property's Energy Efficiency Certificate (EEC), which is required when a property is sold, would make variations in the tax rate easy to calculate, with perhaps an extra 0.5 percent added to properties below the median EEC rating, and a discount of 0.5 percent for properties above it. In this way, he explained, there would be "winners and losers," and tax neutrality would be maintained. Chisholm also suggested a rebate for purchasers who improve the EEC rating of their new home within 12 months.
He described the proposed amendments as "a useful contribution" to meeting emissions targets, although they were not a "panacea," and could be combined with other approaches, such as incentives relating to council tax.
In response, Swinney argued that the amendments would create complexity and add uncertainty. He pointed out that EEC ratings change over time, and that the tax would have no effect on properties rated at zero for LBTT, which make up 70 percent of the housing market and the majority of the sales that take place each year. He added that owners of apartments would lose out, as it can be difficult to get all the owners of a building to agree to improvements, and that the tax did not create an incentive, as the seller would make the improvements but the buyer would get the advantage.
Another member of the committee, John Mason, described the tax as "regressive," arguing that while properties zero-rated for LBTT would receive no help, larger properties would gain a subsidy. Further, the amount of the discount in proportion to the whole transaction would not be an incentive, and the measure would do nothing for properties that do not change hands. As LBTT is to be the first tax brought in by the Scottish Parliament, it would be better to keep it simple, he suggested.
Chisholm rejected the claim that the tax was regressive – he suggested that the discount for larger homes could be subject to a cap, but it was larger homes where energy efficiency improvements were most urgent. Further, if larger homes paid more, zero-rated properties could be brought into the system. He also said that he did not believe that there would be no incentive for sellers, as improved energy efficiency and the discount would give the property a "market premium." He added that tenements tended to have better energy efficiency ratings.
The committee failed to agree on the amendments, with most voting against them.