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Mr. Geoffrey Robinson: I must begin by explaining to the hon. Member for Maldon and East Chelmsford (Mr. Whittingdale) that the Government measure debated in Committee referred to double taxation on the same transaction only--a different set of considerations altogether.
I can tell the hon. Member for Cotswold (Mr. Clifton-Brown) that I am perfectly happy to consider slicing instead of slabbing--one can see the attractions of that, although the current system is well established. I should add that the change could be effective--given sound reasons for making it--only if the overall tax take did not diminish. Even with a more progressive system, there will be bunching and other anomalies. That is why we cannot accept the new clause's attempt in that direction.
The cost of the proposals contained in amendments Nos. 70 and 71 would be £250 million in a full year--perhaps rather more than Conservative Members intended,
although the amendments may be purely illustrative. At the £60,000 and above threshold, the amendments would cost about £700 million. These are orders of magnitude that we could not contemplate.
If Opposition Members would prefer a progressive, slicing system, I should be prepared to consider it; but I certainly cannot deal with that at this stage of a Finance Bill's progress.
The new clause aims to provide relief from stamp duty for land dealers and developers. If they have paid duty of 2 or 3 per cent. on a purchase of land, they would get the duty repaid if they sold the land without improvement within six months, or developed and sold it within two years. The new clause gives no relief where the dealer or developer has paid duty at the 1 per cent. rate.
The proposed relief would have a revenue cost; other things being equal, the rates of duty proposed in the Budget would have to be increased to make up the lost yield. More specifically, that would involve making some arbitrary distinctions between cases qualifying for relief and cases that would not. The same sort of bunching problem would recur.
For example, a dealer selling unimproved land after five months would qualify, but one selling after seven months would not. If the land passed through the hands of a number of dealers in succession, the clause would appear to allow each in turn to claim repayment of duty on his purchase when the land was sold on to the next dealer. A whole series of transactions could result in only one stamp duty charge ultimately being payable.
Similarly, the proposed relief for developers would have arbitrary limits. A development that took longer than two years to complete would not qualify; that would impose arbitrary constraints and distort commercial decisions--not in the best tradition of Tory free-market thinking: more like old Labour. It is much better to impose general rates of duty that apply across the board.
Mr. Hammond:
Can the Minister see any really good reason, apart from revenue raising, why a piece of land that changes hands three or four times in a year should be subject to stamp duty at 3 per cent. on each transaction?
Mr. Robinson:
There must be a very good reason for the land to pass through three pairs of hands in six months; a profit must be made on it in each case, and, if that is the case, the tax should be levied. That is how markets work. In case the hon. Gentleman does not understand, that is what market economics is: each transaction is taxed, even if there are three or six transactions in a given period. It is much better to let a market work in that way. I accept that we may have differences about the level of tax, but it is not sensible arbitrarily to interfere with markets.
Regrettably, I cannot accept new clause 9, amendments Nos. 70 and 71 or, for that matter, amendments Nos. 45 and 46. The latter two amendments would alter the application of the new top rate of 3 per cent. for stamp duty on transfers of land and buildings. There would be no change for residential property, but, for commercial property, the 3 per cent. would apply only to transfers over £5 million instead of £500,000. The implication is clear that the Opposition believe that the 3 per cent. rate is damaging the commercial property market, but no hon. Member made a convincing case for that in the debate.
I say to the hon. Member for Runnymede and Weybridge (Mr. Hammond)--the subject was also raised in earlier debates--that there is no hidden European agenda to bring our stamp duty rates up to the European level. The equivalent taxes in other European countries are a great deal higher--I gave the figures in the previous debate. Some of them are extraordinarily high. In Belgium, there is a 12.5 per cent. registration tax; in France, registration duty is 8.6 per cent; in Germany, the rate is 3.5 per cent. of purchase price across the board, as far as I can see--no graduation there. In Greece, the rates are 9.3 and 11.3 per cent. In Italy, the rate is 8 per cent; in Luxembourg, 5 per cent. of sales price; in the Netherlands, 6 per cent. of market value of property.
Traditionally, those countries have very high levels of such taxes--higher than ours, and their markets are differently structured. We have no agenda to move to those levels, but--I again address my remarks to the hon. Member for Runnymede and Weybridge--I would not prejudge the Budget judgment that the Chancellor of the Exchequer might wish to reach in any year about the level of stamp duty, given the condition of the property market and the overall state of the economy, and the hon. Gentleman could not realistically expect me to do so.
One thing that we do want to prejudge and avoid, however, is boom-bust in the property market. We had the saddest, most disheartening boom and bust, when young people--especially young couples--were caught in awful negative equity traps as a result of such mismanagement. We certainly want to get away from that. That is why all that we do is geared toward stability, and the taxes that we are debating are part of that.
Mr. Whittingdale:
We should be grateful for small mercies. The Paymaster General has conceded that the present system of the slab operation of stamp duty has the absurd effect of giving rise to incredibly high marginal rates, and he has suggested that he might be prepared to consider that. I hope that we may return to that subject when we debate future Finance Bills; we look forward to debating it then.
The Paymaster General has given us several reasons why he considers our amendments to be deficient, and I understand those reasons. The amendments did not constitute our ideal solution. We should have preferred it if the increases had not been introduced. Our preferred option was that the Paymaster General would tell us that he would not be proceeding with them, but obviously he is not prepared to do so.
The Paymaster General has not entirely reassured us about his future intentions. He has told that us that there is no European agenda to move toward the harmonisation of stamp duty rates, and I suppose that we should be grateful for that, but he has obviously not told us that there will be no intention in future to make further increases in stamp duty. My hon. Friends and I retain a considerable suspicion that the Chancellor now views that as an easy way to increase taxes and raise money.
We have sought to show that, although the Chancellor may try to suggest that the measure hits the rich and affluent--the owners of large houses--exactly the reverse is the case. It will have an impact throughout the housing market, and many of those young first-time buyers, whom the Paymaster General mentioned, may end up paying more as an indirect result of the measure.
However, as I have suggested, I do not believe that this is the occasion on which to press new clause 8 to a Division, so I beg to ask leave to withdraw the motion.
Motion and clause, by leave, withdrawn.
Mr. Shaun Woodward (Witney):
I beg to move, That the clause be read a Second time.
Mr. Deputy Speaker:
With this it will be convenient to discuss the following: New clause 10--Lower corporation tax for art sales--
Notwithstanding the provisions in section 140 of and Schedule 25 to this Act (amending section 31 of the Inheritance Tax Act 1984 introducing a new higher threshold for chattels qualifying for heritage exemption), for those chattels which do not qualify as pre-eminent, the rate of tax will be based on the value at the date when the original heritage exemption was agreed between the owner and the Inland Revenue.--[Mr. Woodward.]
Brought up, and read the First time.
'.--(1) This section applies to any company whose business consists primarily of the sale of objects, properties and assets (hereinafter referred to as a "qualifying sale of art") which (i) come within group 11 of Schedule 9 to the Value Added Tax Act 1984 and (ii) are effected by or through such company acting as a recognised agent (as defined in sub-paragraph (4) below) where such recognised agent is liable to account for any amount of corporation tax in respect of a quarterly period (hereinafter referred to as a "qualifying tax payment").
(2) The recognised agent shall be deemed to have paid the full amount of his qualifying tax payment in respect of any quarterly period even though he deducted from that full amount a sum equivalent to 40 per cent. of the amount due (the "permitted deduction").
(3) The amount of the permitted deduction shall be calculated for each quarterly payment period, and a permitted deduction may not be carried back or forward for offset in any other quarterly payment period.
(4) For the purposes of this section, a recognised agent means any auctioneer or any person carrying on a trade of dealing in any description of moveable property, or of acting as an agent or intermediary in dealings in any description of moveable property. In respect of any qualifying sale of art there shall be not more than one recognised agent for the purposes of this section within any period of six months who in the event of dispute shall be determined by the Commissioners of the Inland Revenue.
(5) This section shall come into effect on 1st October 1998.'.
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