The upcoming UK budget (21 March) may see the controversial 50 per cent tax on top earners being replaced with a mansion tax on real estate worth more than £2 million (around $3.2 million). But a UK think tank has come out against the tax and published a report demonstrating that property owners are already heavily taxed in the country.

The Centre for Policy Studies highlights that property taxes in the UK contributes 4.2 per cent of GDP, more than twice the average, according to the Organisation for Economic Co-operation and Development.

One of the major arguments against the “50p tax rate” is that it does not generate much tax revenue. The CPS believes that a potential mansion tax would have the same problem; at 1 per cent of the value over £2 million it would only yield £1 billion a year, which is the equivalent of 0.2 per cent of total tax receipts, the right-wing think tank said. At that level, it would only generate roughly a third of that of the top rate of income tax.

Opponents of the 50p rate often say that it is a disincentive to business and wealth creation, and particularly damaging for London as one of the world’s leading business locations and financial centres. The CPS fears that a potential mansion tax would undermine London’s position in a similar way.

In the research report entitled Taxing Mansions: the taxation of high value residential property, the CPS also argues that it would be both difficult and expensive to value all relevant properties. What is more, the think tank said that the “non dom levy”, which is due to rise from £30,000 to £50,000 a year, already collects revenue from owners of high value property domiciled overseas.

It has been a long-standing ambition for many in the Conservative Party, the senior partner of the UK coalition government, to scrap the 50p tax rate. However, the junior coalition partner, the Liberal Democrat party, has been adamant that if it were to go it would have to be replaced by a tax that delivers fairness. Many media outlets are now reporting that the Lib Dems see a mansion tax as the preferred solution.