Unlike the UK, Guernsey has no capital gains tax, which is charged based on profit made from selling an asset, such as property.
But with increasing concerns about the ability to buy property locally, with some upset
that people from outside the island are able to buy and rent out local property, there are calls for the States to intervene in the market.
Deputy St Pier admitted that the issue was something of a ‘sacred cow’, and may be seen as a return to Dwellings Profits Tax, which was brought in by the States in the 1970s to dampen property speculation.
It was scrapped eventually and a bid to bring it back, led by Deputy Yvonne Burford a decade ago, was opposed by Deputy St Pier and the Treasury & Resources Committee.
‘Going down this route might not be welcomed by those with multiple properties, but wouldn’t, of course, impact the majority who just own their own homes,’ said Deputy St Pier.
‘Taxing local realty is also not a matter of international tax competition.’
SPF Private Clients managing director Pierre Blampied said introducing essentially a capital gains tax could potentially cause more problems with renting, but Deputy St Pier said it could be a way to reduce demand.
‘In the context of a marketplace that is reporting high levels of buy-to-let, while we know we need more supply with more houses built, I am posing a question whether subjecting to income tax any gain in the value of second or more homes if and when they are sold, would be an appropriate demand-side response? Using tax as a tool to reduce the total return from this form of investment to reduce the demand for buy-to-let properties.’
The average local market rental reached £1,817 per month in the second quarter of this year with costs being driven up by the lack of stock on the market.
Deputy St Pier said that while tax economists could weigh more heavily on the topic, he was still keen to initiate debate.
‘If we keep just doing what we have always done, then we shouldn’t be that surprised if we keep getting the same result – unaffordable housing.’
Some islanders believe that investors buying up multiple homes to lease at high rates is contributing to the housing ‘crisis’.
But Mr Blampied said this is not a significant contributor to the problem.
‘If you said to landlords they won’t have the properties to rent out, then they might pull out of the market. It could make landlords say they will move to do something else with their investment which would be more attractive if they had debt on it. A tax on capital gains would potentially give us a problem on letting.’
He clarified that investors were not always from outside the island.
‘It is generally locals, and there is a market for it. If there were to be another Charroterie Mills [development of flats], a number would be bought by investors.’
Local property developer Charles McHugh criticised the idea and broader attitudes towards property development.
‘It’s time to make developers and landlords part of the solution not the problem,’ he said on Twitter.
‘If you treat people with enmity you will make the situation worse not better. Harness and incentivise developers’ resources for the community with incentives to build, not burden them with more taxes.’