Sunday, 6 October 2013

Land Value Tax

Here's my simple implementation of a much-championed alternative to council tax and business rates.

Land Value Tax is a levy on the value of the land, not on the value of any buildings sitting on the land. So homeowners will no longer be financially penalised for adding, say, an extra bedroom to their houses - which they are at the moment under council tax. The value of their houses will go up, but not the amount they pay to the council. Indeed, most people will end up paying less, but the owners of large acreages will pay more.

Meanwhile, business landlords-cum-speculators will have to pay the new tax whether their commercial properties are in use or not - currently they pay lower business rates for under-occupancy, and if a site is derelict, nothing. By forcing them to redevelop and re-let - or re-sell - in this way, LVT will drive down commercial rents and freehold prices as more properties become available. This will enable many more people to start up in business, or to expand existing ones.

LVT should also be applied to farmland, which is exempt from all forms of local taxation at present. Such land is often hoarded by speculators hoping to obtain planning permission for commercial or residential development in future. Furthermore much farmland is under-used - a large grouse moor is liable for no more tax than a derelict commercial building. The ensuing shortage of farmland pushes its price up for aspiring farmers. Again, prices and rents will fall as owners are taxed for the first time ever, forcing owners of unproductive assets to let or sell.

Some people would be hit hard by a sudden introduction of the new tax regime - small farmers, say, or people living in big houses on low incomes. So subject to means-testing, they will only pay what they're paying now. However, a land valuation will take place as soon as these properties are sold and the new owners charged accordingly. For everyone else their land will be revalued every ten years, LVT liability being adjusted afterwards.

1 comment:

Keep it clean.....