{"title":"Limiting the distortionary effects of transaction taxes: Scottish stamp duty after the Mirrlees Review","authors":"Daniel Borbely","doi":"10.1111/1475-5890.12270","DOIUrl":null,"url":null,"abstract":"<p>We investigate the distortionary effects of transaction taxes through a case study of the Scottish residential property market. We make use of four sources of variation in transaction tax rates present in recent Scottish tax systems: (1) jumps in tax liabilities at tax thresholds; (2) jumps in marginal tax rates at thresholds; (3) a tax announcement that created temporary tax saving opportunities; and (4) a shift to a more progressive transaction tax regime. Our results indicate that market participants are highly responsive to tax changes and are willing to change the price and timing of transactions when tax savings opportunities are present. We also find that progressive reform had a significant positive effect on transaction activity in the market segment where tax rates were reduced. However, the higher end of the market, where tax rates increased, was mostly unaffected by progressive reform, with the exception of the market for very expensive properties, where a negative effect is identified. Implications of our findings are that if governments want to make transaction tax regimes more efficient, progressive taxation might be a good way to limit distortionary effects, whilst also encouraging transaction activity in the lower end of the market.</p>","PeriodicalId":51602,"journal":{"name":"Fiscal Studies","volume":null,"pages":null},"PeriodicalIF":2.2000,"publicationDate":"2021-05-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1111/1475-5890.12270","citationCount":"3","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Fiscal Studies","FirstCategoryId":"96","ListUrlMain":"https://onlinelibrary.wiley.com/doi/10.1111/1475-5890.12270","RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 3
Abstract
We investigate the distortionary effects of transaction taxes through a case study of the Scottish residential property market. We make use of four sources of variation in transaction tax rates present in recent Scottish tax systems: (1) jumps in tax liabilities at tax thresholds; (2) jumps in marginal tax rates at thresholds; (3) a tax announcement that created temporary tax saving opportunities; and (4) a shift to a more progressive transaction tax regime. Our results indicate that market participants are highly responsive to tax changes and are willing to change the price and timing of transactions when tax savings opportunities are present. We also find that progressive reform had a significant positive effect on transaction activity in the market segment where tax rates were reduced. However, the higher end of the market, where tax rates increased, was mostly unaffected by progressive reform, with the exception of the market for very expensive properties, where a negative effect is identified. Implications of our findings are that if governments want to make transaction tax regimes more efficient, progressive taxation might be a good way to limit distortionary effects, whilst also encouraging transaction activity in the lower end of the market.
期刊介绍:
The Institute for Fiscal Studies publishes the journal Fiscal Studies, which serves as a bridge between academic research and policy. This esteemed journal, established in 1979, has gained global recognition for its publication of high-quality and original research papers. The articles, authored by prominent academics, policymakers, and practitioners, are presented in an accessible format, ensuring a broad international readership.