THE two most powerful Lib Dems yesterday called for more tax to be levied on high-value homeowners to offset the scrapping of the 50p rate of tax.
Deputy prime minister Nick Clegg and business secretary Vince Cable both said those with expensive properties would be targeted when the 50p rate is eventually dropped but ruled out a revival of the controversial Lib Dem “mansion tax” plan.
It is understood council tax bands could be reevaluated so those with high value properties will pay more. Clegg also said the tax hikes could come through changes to the structure of stamp duty, the top rate of which is already going to five per cent next month.
Cable said he and Chancellor George Osborne are in agreement over cutting the 50p rate. However, while Osborne reasserted his long-term opposition to the rate, he said in the Budget “now wouldn’t be the right time to remove it.” He also said he will ask HMRC to investigate how much revenue it raises.
Osborne said in his Budget speech that: “There’s one area that needs extra work in the coming months, and that’s on the taxation of very high value property, where evasion and avoidance are widespread and some of the wealthiest are not paying their fair share...we will also be redoubling our efforts to find ways of ensuring that owners of high value property cannot avoid paying their fair share.”
A Treasury source told City A.M. Osborne’s emphasis is on reducing tax avoidance. The main scheme being targeted is one which allows some people to avoid stamp duty by purchasing homes via companies.
Cable said: “You need to have a proper base for taxing property. That’s one of the things we’re going to have to look at as we change away from these very high marginal rates.
“[The tax rate] moved up to 50p in an emergency because we had to have a sense that everybody was bearing some of the pain. The Chancellor said in the budget that we’re going to have to move away from that. I agree with him. The Liberal Democrats agree with him.
“But it needs to be a change which is fair overall and takes account of the fact that the wealthy have got to pay their share. The emphasis may well have to shift from high marginal rates of tax on income, which are undesirable, to taxation of wealth, including property. The chancellor said that in his Budget.”
But the Treasury appeared to distance itself from the comments, releasing a terse statement saying: “The Government’s tax policies were set out in full in last week’s Budget.”
Cable argued for a so-called mansion tax while in opposition, proposing a 0.5 per cent charge on properties worth more than £1m. He was forced into an embarrassing U-turn after coming under fire from his own party, after which the proposed threshold was hiked to £2m.
Cable has enjoyed a higher profile in recent weeks after months in the wilderness following his unguarded remarks about “declaring war” on Rupert Murdoch.