WITH more than half of the UK’s wealth tied up in land and property, the way we tax land affects not only who owns it but also how that wealth benefits the broader economy.
As public finances come under strain under increased pressures, there are calls to revisit how we tax land, including whether land value taxation (LVT) could replace Council Tax as a more effective, fair and productive approach.
LVT has long been proposed as an effective way to tax. It is seen as fair because the value of land is significantly socially created by public investments, policy and regulation. It is seen as economically effective because it doesn’t disincentivise productive activity, and also has the advantage of being hard to avoid.
READ MORE: Watch our live council tax discussion with Common Weal's Craig Dalzell
However, while the theory for LVT is compelling, introducing it in practice has proved more challenging. Our research found it has been tried in 33 countries, often in conjunction with other property taxes, and this experience offers useful learning. Internationally, successful LVT systems rely on sustained public support and political consensus. When these elements are missing, efforts to introduce LVT often don’t last long.
Introducing a single land value tax to replace several existing taxes, however strong the theory, is unlikely to be practical in one step and the basic building blocks are not currently in place to make it workable. There is though, a strong case to reform annual land and property tax and change existing taxes to better tax land value.
The case for Council Tax reform is well articulated, with the current charges now only loosely tied to property values and set within a framework that has remained largely unchanged since 1991. Several approaches to reform have been put forward and these need not wait for wider land value tax reforms.
A broader approach to reforming annual land and property taxation would involve non-domestic rates. Reforms here could introduce a split of value between the underlying land value and the value of the built property. Moving in this direction could allow tax to better reflect where value really lies, without being a disincentive to making improvements to property.
A reformed system of annual land and property tax would also open up the opportunity to replace Land and Buildings Transaction Tax, a reform recommended by several UK government reviews given it is seen to be a disincentive to moving house, constraining productive economic activity.
READ MORE: Lack of local tax reform 'one of Holyrood's biggest failures'
Making reforms to better tax land value requires groundwork. Foundation steps include completing a comprehensive land register and developing a cadastral system to bring together data on land ownership, use, and value.
A phased programme to bring all land on to the valuation roll would open up the future options for government to reform and improve annual taxation of land and property.
At the Scottish Land Commission, we are currently refreshing our advice to ministers on land and tax policy, ahead of the Scottish Government’s tax strategy.
Our advice emphasises the value in creating a route map for phased reform that sets a clear direction of travel and a step-by-step approach. Around that we could then build the collective engagement, understanding, clarity and consensus that any successful and lasting land tax reforms will require.
Hamish Trench is chief executive and accountable officer of the Scottish Land Commission. He is a former chartered surveyor with experience of land policy, management and research in the public and private sectors.
His previous roles include director posts at the Cairngorms National Park Authority and Deer Commission for Scotland, and working for a national firm of property consultants. He is a Fellow of the Royal Society of Arts (RSA).
Why are you making commenting on The National only available to subscribers?
We know there are thousands of National readers who want to debate, argue and go back and forth in the comments section of our stories. We’ve got the most informed readers in Scotland, asking each other the big questions about the future of our country.
Unfortunately, though, these important debates are being spoiled by a vocal minority of trolls who aren’t really interested in the issues, try to derail the conversations, register under fake names, and post vile abuse.
So that’s why we’ve decided to make the ability to comment only available to our paying subscribers. That way, all the trolls who post abuse on our website will have to pay if they want to join the debate – and risk a permanent ban from the account that they subscribe with.
The conversation will go back to what it should be about – people who care passionately about the issues, but disagree constructively on what we should do about them. Let’s get that debate started!
Callum Baird, Editor of The National
Comments: Our rules
We want our comments to be a lively and valuable part of our community - a place where readers can debate and engage with the most important local issues. The ability to comment on our stories is a privilege, not a right, however, and that privilege may be withdrawn if it is abused or misused.
Please report any comments that break our rules.
Read the rules hereLast Updated:
Report this comment Cancel