The Staggers 31 October 2013 Osborne's plan to tax foreign property owners is smart politics and smart economics Imposing capital gains tax on this increasingly resented group will gift the Treasury more easy revenue. Print HTML After stoking a new housing boom with Help to Buy, George Osborne has every intention of taking advantage of it. Sky News's Ed Conway reports this morning that the Chancellor is investigating imposing capital gains tax on foreign property owners with an announcement expected in the Autumn Statement. At present, while British citizens pay CGT at 18% or 28% when they sell a property that is not their main home, non-residents are exempt. But with foreign investors purchasing around 70% of all new builds in central London, Osborne, still burdened by a deficit that stood at £115bn last year, has spied a revenue-raising opportunity. The move would follow logically from the new charges already introduced by the Chancellor. Largely unnoticed, he has imposed CGT on residential properties bought through overseas companies (thus eliminating a popular loophole) as well as stamp duty of 15% - and the Treasury is pleased with the results. As the Telegraph's Benedict Brogan wrote in his column this week, "Not only did introducing a swingeing 15 per cent recurring levy on properties held by off-shore companies drive plenty of buyers to switch to pay high levels of stamp duty, but it appears a good number of wealthy foreigners are more than happy to pay the charge, enriching the Exchequer still further." He added: "Indeed, it is tempting for the Treasury to conclude that there is more to be plucked from this golden goose than initially realised. First non-doms, then company-held property, next the foreigners queuing at property fairs in Singapore and the Gulf to buy a little piece of London off-plan, with no intention of ever living there: the political case for monetising this wealth looks increasingly attractive." It is the latter group that Osborne is targeting with his new raid on capital gains. Esate agency Knight Frank estimates that 65% of overseas buyers rent their London properties rather than live in them, using the housing market as a global reserve currency. For this reason, the move is politically astute; it targets an increasingly resented group and allows the Chancellor to claim, however implausibly, that he is ensuring the wealthy pay their fair share. It is also smart economics. Property taxes are easy to collect (you can't move a mansion to Geneva) and aid growth by shifting investment away from housing and into wealth-creating industries. Consequently, they are less economically harmful than taxes on consumption, income and corporations. But one person unlikely to be impressed by Osborne's plans is Boris Johnson. The capital's mayor wrote recently in his Telegraph column: "It is true that London is now globally recognised as such a desirable city that its property is treated effectively as another asset class – a safe investment in a turbulent world. It is also true that this phenomenon has helped – I stress helped – to buoy property values and to fuel the anger of professional people who cannot live in districts where their parents grew up, and who cannot see how their kids will ever be able to afford to buy in London. "But the answer is not to try to persecute rich foreign investors with new mansion taxes, or complicated and unenforceable taxes on the tiny proportion of homes they leave empty." It looks as if Osborne, to quote Gordon Brown, has rejected his representations. › Alec Baldwin: Americans have been lied to George Osborne leaves 10 Downing Street on October 7, 2013 in London. Photograph: Getty Images. George Eaton is political editor of the New Statesman. From only £1 per week Subscribe More Related articles 7 problems with the Snooper’s Charter, according to the experts The buck doesn't stop with Grant Shapps - and probably shouldn't stop with Lord Feldman, either The Fire Brigades Union reaffiliates to Labour - what does it mean?