13.5% Vat and 9% stamp duty got us into trouble and by scrapping them it could get us a long way out of it. Maybe the commission on taxation will give us some joined up thinking on this .
Let us assume the banks lent at 70% of net value ( including rolled up interest) - the developer putting in 15% of anticipated value and profits projected at 15% of anticipated sales. If flats were to be sold at 340.5k ( 300k x 1.135) each then the person buying the flat would be paying a total of 371,145 including stamp . The bank would have lent 300k x 70% is 210k.
Let us assume that stamp duty and Vat are abolished - the initial flat can be sold to the prospective purchaser at 210k i.e. 56.5% of his original expected cost to get the bank out. I wont bother with the calcs but there is a multiplier effect when you apply the reductions to undeveloped land.
If 210k is the market value the alternative is that the flat eventually gets sold for 170k plus 13.5% vat plus 1.09 stamp and the government in whatever roundabout way loans the 40K to the bank.
Why dont they
- nationalise the banks
- then repossess the land
- then scrap the associated taxes
- then sell the land
- then sell the banks
- then reintroduce the taxes.