Smith said while it was unrealistic to expect Darling to kill off the tax that ravages the housing sector during his Budget address he could do much to alleviate the effects by altering thresholds and grading the way the property purchase tax was levied on home buyers.
"A previous tinkering saw the threshold for the start of the tax raised to £175,000 and this could now realistically be lifted permanently to £200,000," Smith said.
"But if this is done, the first £200,000 of the purchase price of all houses should remain tax free.
"I would then propose a 1% tax band from £200,000 to £300,000, with 2% between £300,000 and £500,000, 3% to £750,000, 4% to £1 million and 5% beyond that.
"The tax would be graded throughout to diminish the effect of the threshold system that we have now.
"If a person buys a house under the current system for £250,000 then the tax is paid at 1% on the price. But take it up to £250,001 and there’s a £5,000 tax penalty payable to the Treasury. It puts a 45% Income Tax bracket in the shade and hits ordinary working people in the process.
"Many new homes fall in the £200,000 to £300,000 range and the change I suggest would prevent the slightly more expensive homes facing this tax strangulation, which is blocking the market. The effect is easy to see from the disastrous financial results posted by house builders in recent times.
"This change would not only give an effective stimulus to the housing market but also would help jobs in the building sector as work restarted and then have a knock-on effect for the retail furnishing and domestic appliance outlets as well as a lesser benefit for legal services and others. Yes, it would benefit estate agents too but this is a long way down the line. Many others would be reaping the advantages before I see a business stimulus for my sector.
"This graded system I propose would effectively cause no increase in the tax take until the house value passed the £1.5million mark and at that level it becomes affordable because people are more concerned with the quality and appeal of the home they want to buy than whether it might cost them a few thousand pounds more in Stamp Duty.
"Why should someone paying £500,000 for a house pay Stamp Duty at the same rate as someone ready to fork out £2million for a property who, by the very nature of the transaction scale obviously has more budget to play with?
"There are always calls for a fairer tax system, with those more able to pay taking a greater role in shouldering the fiscal burden, and this is one way to effectively apply it in the residential property market."
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