Windfall Profit Taxes Spread

Bad tax policy is highly contagious and can even leap across the Atlantic Ocean. Case in point, the United Kingdom is set to implement a windfall profits tax on residential and commercial developers, as opposed to the proposed windfall profits tax on oil companies in the U.S.  From Reuters:

British finance minister Gordon Brown said on Monday the government plans to introduce a windfall land tax on money made by residential and commercial developers.

Brown said the tax, which would not be implemented before 2008, would help provide additional funding for local authorities.

The chancellor said the so-called planning gain supplement, which comes on the back of a booming UK property market, would give local authorities "a fair share" of gains generated from property development to invest locally.

"Our aim is not just to build homes, but to build communities and to fund new roads, schools, hospitals and infrastructure," Brown said.

It will be interesting to see how much the UK’s windfall profit tax slows the real estate development industry in years to come. The tax will be levied when development companies begin construction, which is likely to further slow the growth of development.

Check out our previous blog posts on windfall profit taxes here, here, here, and here.