How could Annual Ground Rent replace council tax in Scotland?

We spoke with experts on a range of different systems, including full revaluation, a Scottish Service Tax and a land value tax.

Speaking to The National, SNP member Graeme McCormick explained his system of Annual Ground Rent (AGR) and how he believed it could serve as an alternative to all taxes in Scotland as well as just council tax.

Here's what he had to say. 

READ MORE: How a land value tax system offers a real alternative

What exactly is Annual Ground Rent?

Most people think that AGR is a form of land value taxation where the unimproved value of the land is taxed.

That involves valuing every piece of land – an expensive, time consuming exercise and open to endless argument.

What about your system?

My system is called Annual Ground Floor and Roof Rent (AGFRR). Under devolution it replaces council tax, commercial and water rates, LBTT, and sets a zero rate for income tax on earned income.

AGFRR involves no land valuation. The space you own is charged. By space I mean the land and the floors and the roof of any property or structure on it.

Government just charges a rate per square metre on that space.  The rate charged depends on the land type which you own. For illustration, I use two land types – urban and rural.

Urban land types are all land and property within an area where Scottish Water can provide sewerage, and all non agricultural buildings in rural Scotland such as  farmhouses, shops and hotels.

How would this help support public services?

So much space is not taxed because it’s dilapidated or vacant. 

There is no pressure to use it productively. If AGFRR was levied on all publicly and privately owned space, then the public sector would have to use its space productively or dispose of it to maximise  public funds. Our towns would flourish again. 

Although the AGFRR rate for rural space would be modest, the large private and public landowners would contribute significantly.  

I haven’t been able to chart every building on the estates  owned by Scotland’s largest landowner Anders Holch Povlsen (above), but I estimate his AGFRR would be around £70 million each year. 

The key question

The contributors to the current debate  fail to address the  basic question. What are we trying to achieve? If it’s  just to raise more cash for public services in a slightly more equitable way,  then we won’t transform lives. 

I’m for abolishing poverty and we can all live abundantly.  We can, even under devolution, though independence would be far better as AGFRR would abolish all reserved taxes such as VAT, Corporation Tax, Capital Gains Tax, Inheritance Tax, etc. 

The arithmetic is simple. Central and local governments calculate their budgets for the year to end poverty, deliver public services and support enterprise. The total cost is divided by the square meterage of space in Scotland, then the rates per square metre for urban and rural land types are  adjusted to ensure affordability.  

AGFRR is calculated by owners multiplying their space by the appropriate rate. 

Unlike other forms of taxation we don’t need Westminster’s co-operation and consent to introduce and manage AGFRR. 

READ MORE: This is how a land tax could work in Scotland

It can be brought in quickly as almost all the infrastructure is in place. All that is required is the legislation and the creation of a website for owners to register their space and pay the AGFRR. 

Owners could recover the AGFRR from any  tenant. The legislation will empower Revenue Scotland to repossess space which has not been registered within a statutory  time limit, so payment  cannot be avoided and the whereabouts of owners is immaterial. 

How do you end poverty?

Central to the AGFRR proposition is a holistic regime which includes a universal citizens income (UCI) of £200 a week for every adult and child.  

A total of £20 of the UCI is invested in Scottish enterprises so every Scot would always have a direct share in our economy and build personal capital.

That equates to a fund of at least £5.5 billion of Scottish money each year from which Scottish entrepreneurs could borrow instead of the over dependence on foreign funders. 

What about the impact on business?

Starting or developing a business with a guaranteed £200 per week would be a huge personal boost. 

For sole trader and partnership businesses, no income tax would improve profitability and provide certainty. 

Limited companies who currently pay corporation tax to the UK Government would see the benefits of independence where only AGFRR would be charged.

Can you give an example of the effect of AGFRR?

Here’s an example of how someone on an average annual salary of £36,500 owning  a modern semi-detached house would be better off if AGFRR and the UCI were introduced.

READ MORE: Lack of local tax reform 'one of Holyrood's biggest failures'

Currently after payment of all taxes the sum is £22,498.

If devolved taxes and income tax were replaced with AGFRR under devolution the sum is £35,946. Under independence with AGFRR replacing all reserved and devolved taxes the sum is £41,975.

Prominent examples

Some prominent examples of pieces of land which would raise significant funds include the Queensferry Crossing, which could contribute £990,000 while Murrayfield would contribute more than £3 million. 

Elsewhere, Bae Systems Glasgow yards could contribute £16,000,000.