Is the introduction of Capital Gains Tax really the answer to plugging the hole in Government’s Strategic Reserve as has been proposed for debate by States Members?
Whilst on the face of it, future property gains could appear to be an easy target, in reality, such a proposal could pose huge risks of economic harm that could have ramifications beyond the territory of the traditional buy-to-let property investor.
Given the already severely dampened levels of activity in the market, most acutely felt amongst apartments, there is a very real risk that even the slightest hint of further taxation on the horizon could compound the already-present deterrents to investment and lead to many more properties being brought back to the market as landlords seek to exit. The resulting loss of confidence and falling prices will inevitably impact owner-occupiers particularly those who bought at the peak of the market, including first time buyers, thereby further eroding personal equity and reducing liquidity. New development has already been hammered by the perfect storm of spiralling cost and falling values and any new taxation will simply exacerbate this.
Beyond the ramifications to the local property market, the introduction of any sort of capital gains tax would represent a seismic shift in the Island’s approach to taxation and cause concern to many who are attracted to the Island by the stable tax regime.
As always, there is a delicate balancing act in seeking out the fairest way of raising taxation, however in this case, timing could not be worse, and there are some very real risks of unintended consequences to consider.
