Land Value Taxation

Recapturing Community Created Land Values

What is meant by ‘Land Value’.

• The full market value of the land without the buildings.

• Depends on the best economic use of land disregarding existing use and buildings.

• It takes account of all public regulations of the land (but not the buildings )

• Includes site improvements such as drainage, sewerage and roads

Land Value Taxation

• A tax on the full market value of land, excluding any buildings.

• Site improvements can be deducted from taxable land value after 30 years

• Recommended it is based on the annual rental value, rather than capital value.

How land is valuedfor residential /commercial use

• Location. Statistical analysis of: sales of vacant plots in the area, properties with housing, properties with demolished buildings.

• Regulations. Total floor space which can be constructed on a plot.

• Knowledge of local valuers

Qualities of a good tax

• taxes should be fair

• economical to collect

• difficult to avoid and evade

• revenue should be certain

• fall as lightly as possible on production

• have effects consistent with government policy objectives

Ability to pay

• Correlation between land ownership and ability to pay

• LVT liability will be reflected in the purchase price of land

• LVT cannot be passed on in higher prices or higher rents

The burden of land value taxation is nil. The higher the tax

rate, the lower the land price.

Not to tax land values is to raise the market price of land

Based on benefits received

Unimproved land values are determined by:

• its natural advantages- e.g. mineral deposits• its location in relation to amenities• its earning potential• public investment in infrastructure• planning consent• None of these factors are determined by the

land owner

Impossible to avoid or evade and economical to collect

• Land cannot be hidden

• Value can be determined from a map

• Frequent valuations are possible.

• Cheaper to value than buildings

• Cost of collection -approximately 1% of revenue.

LVT is incentive taxation

• Taxes on income reduce incentives to work

• Taxes on development penalize development

• Taxes on goods raise prices and discourage production

• Taxes on profit reduce incentives to invest.

• Taxes on land ENCOURAGE development

Taxes on buildings are taxes on development and improvements.

Taxes on land values are taxes on non development and non

improvements

• Reduce inflation

• Reduce unemployment

• Redistribute income and wealth

• Regenerate urban development

• Protect the environment

• Achieve stable growth in the economy

LVT helps achieve policy objectives

LVT helps reduce inflationary pressures

• Reduces speculative demand for land

• Increases supply of land on the market

• Initially reduces land prices

• Prevents property booms, which fuels inflation

• Reduces the need for penal interest rate rises to control property booms

LVT reduces unemployment

• Idle land means idle hands• It brings unproductive land to productive use• Stimulates building development• Creates jobs in the construction industry• New development stimulates economic

activity

LVT creates fairer wealth distribution

• Returns land values created by the community back to the community

• Other taxes can be reduced

• Helps finance public services which benefit the poor.

• Prevents property prices rising rapidly

• Reduces upward pressure on rents and mortgages

“Nothing can be more reasonable than that of a fund which owes its existence to the

good government of the State”

LVT leads to urban regeneration

• Reduces speculative demand for land

• Speculative holdings developed or sold for development

• Land prices fall to a level that developers can afford

• Development encouraged, not penalized

• Leads to development of under-developed/ derelict properties.

LVT and the environment

• Encourages more economic use of urban land

• Reduces pressure for green belt development

• Reduces commuting

• Therefore reduces the need for road construction in the countryside

• Reduces the growth of traffic pollution

LVT and stable economic growth

• Free market economies tend to grow in cyclical swings - of boom and recession

• Booms are led by speculative rises in property prices.

• Higher property prices encourages inflationary borrowing

• Property prices become an overburden for commerce

• Recession follows.

conclusion

• LVT will claw back value created by the community, to the community

• It will provide finance for improving public services

• It will stimulate private development which will accelerate urban regeneration without the need for further public funding.

Land values are created by the community, not least by public

investment in development. Why should the community not reap

the benefits of its own investment?