The Incidence of Transaction Taxes: Evidence from a Stamp Duty Holiday

36 Pages Posted: 25 Sep 2014

See all articles by Timothy J. Besley

Timothy J. Besley

London School of Economics & Political Science (LSE) - Department of Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Neil Meads

Bank of England

Paolo Surico

London Business School - Department of Economics; Centre for Economic Policy Research (CEPR)

Date Written: July 2014

Abstract

This paper exploits the 2008-09 stamp duty holiday in the United Kingdom to estimate the incidence of a transaction tax on housing. The average reduction in the after-tax sale price is found to be around £900 against the backdrop of an average tax reduction of about £1500. While we estimate an increase in transactions of properties affected by the tax holiday around 8%, most of this effect appears to have reversed rapidly after the policy was withdrawn, suggesting mostly a short-term retiming of transactions. The findings are calibrated to a simple bargaining model to show they imply that about sixty percent of the surplus generated by the holiday accrued to buyers.

Keywords: surplus incidence, surveyor's evaluation, tax holiday

JEL Classification: H22, R32

Suggested Citation

Besley, Timothy J. and Meads, Neil and Surico, Paolo, The Incidence of Transaction Taxes: Evidence from a Stamp Duty Holiday (July 2014). CEPR Discussion Paper No. DP10063. Available at SSRN: https://ssrn.com/abstract=2501537

Timothy J. Besley (Contact Author)

London School of Economics & Political Science (LSE) - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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Neil Meads

Bank of England ( email )

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Paolo Surico

London Business School - Department of Economics ( email )

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Centre for Economic Policy Research (CEPR) ( email )

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