Taxation and Housing Issues Introduction Taxation and housing are two crucial areas that reflect the economic performance of a country. Generally, countries with stronger economic background levy comparatively lower tax rates on sales, income, and other transactions…
Hence, in order to understand the economic feasibility of a particular country, a close analysis of the prevailing issues on taxation and housing is necessary. This paper will critically analyze various issues pertaining to taxation and housing in the United Kingdom, United States, and United Arab Emirates. Issues relating to taxation and housing in the UK The economic spectrum of the United Kingdom indicates that taxation issues have impeded the faster growth of the country. UK holding companies have been heavily suffering from tax issues in the recent years. Corporation tax deductions are available to a UK holding company on the interest payment to investors subject to anti-avoidance policies. More details on these features can be found at . The anti-avoidance provisions including transfer pricing are increasingly complex in nature and therefore the country’s holding companies are not benefited from tax reductions. In addition, a UK holding company does not get any tax deduction benefit while paying dividends to investors. Similarly, the tax deductions allowed to the UK’s small scale enterprises for boosting entrepreneurship actually result in a deadweight cost. This situation adversely affects the overall growth of the economy. Over the past few years, the UK government has faced a series of issues associated with the country’s corporate tax structure. In order to resolve the limitations of its corporate tax structure, the country is changing its policy from taxing worldwide profits to a more territorial taxation approach. Irish tax issues on UK transactions remain to be a major growth impediment to the UK’s business sector. Tax evasion has been a potential issue in the UK over the last few decades, and recently the country adopted tax fraud prevention measures. When an outsider deals with purchase of real property in the UK, he has to consider a number of factors including capital gains tax, stamp duty, inheritance tax, and income tax. The UK housing market has been struggling with numerous issues especially since the global financial crisis 2008. As a result, even small flats are becoming unaffordable to lower class of the society. Housing sector data show that affordability of housing in the UK has been getting worse since late 1990s as house prices grew faster than earnings rate. Although most of the developed countries including the United States experienced housing price increases in the beginning of the 21st century, this issue was different in the United Kingdom in two aspects. Firstly, the country’s house prices boom began earlier as compared to other developed economies, and indicated relatively sustained increases. Secondly, the regional pattern of the country was almost uniform. As per statistical data, house prices in the United Kingdom increased by 90% between 2002 and 2007. The average age of first time home buyers is also increasing in the country. Although mortgages were increasingly available to people, mounting housing prices remains to be an issue in the country. As reported by Department for Environment Food and Rural Affairs (2004), an additional 39,000 houses per annum were essential to meet housing requirements of the country effectively. The primary issue behind the housing market struggle in the UK is that the country does not have enough space to build new houses. In contrast, many people possess more ...
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