Taxing land? Scottish Greens suggest Land Value Tax
It has long been a matter of debate as to how to fund local government and local facilities and developments. The traditional method in these islands was the system known as ‘rates’, which were a local tax based on historic property values. In Ireland domestic property taxes were abolished in the later 1970s, while in Britain they now consist of the so-called Council Tax, which applies to residential property.
Now in Scotland the Green Party has suggested the introduction of a Land Value Tax, which they propose should be based on the value of land without taking into account any development that might be on it, and levied at 3.16 per cent of that value. As a matter of interest, the research commissioned by the Scottish Greens suggests that Scotland (in terms of its land) has a total value of £12.3 billion. They believe this will create fair local taxation while at the same time providing a disincentive to property speculation.
Whether this is a workable proposal is something that might need to be considered further. But it seems to me to be clear that property taxation is one of those issues that will need to be addressed properly at this period of public exchequer shortfalls, and at least this is a basis for such a discussion.
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October 4, 2010 at 2:48 am
Busineses in Ireland still pay rates and at levels which differ markedly (& essentially arbitrarily) between local authorities. So the ones who pay locally are the ones without a vote, inverting the dictum of “no taxation without representation”.
In England & Wales, locally varying business rates were replaced in 1990 by a Uniform Business Rate. At the same there was a revaluation of properties: the previous valuation had been in 1973 & was pretty out of date.
The situation in Ireland is a mess and while many people accept some form of local domestic is desirable no government is prepared to do anything about it since, even at a low level, it would probably provoke a hysterical reaction. Increase the VAT rate and no one says Boo. Most countries have one or more local domestic tax. While the Community Charge aka the “Poll tax” was certainly a disaster, it is quite possible to have functioning and fair local taxes.
October 4, 2010 at 11:08 am
Kevin, you say: ‘While the Community Charge aka the “Poll tax” was certainly a disaster, it is quite possible to have functioning and fair local taxes’.
I absolutely agree with that. One of the benefits, if one can say that, of the current crisis is that it may force the government to act and introduce local property-based taxation.
October 4, 2010 at 8:49 pm
Ferdinand, it could be hard work selling it, a lot of work would need to be done.
Its essential that it is transparent, perceived as fair and not too expensive to administer (big problems with the poll tax).
The valuations also need to be updated. In the present market thats a bit tricky because the market has been so volatile.
The big issue then is how do you allocate the receipts? You can’t just let everyone keep their own as some authorities have bigger tax-bases (more property or more valuable property). Secondly, some authorities need to spend more to provide their services. There are various of doing this “fiscal equalization”. The UK system, which I am familiar with, is pretty good.
October 4, 2010 at 11:45 pm
Why does local taxation have to be based on property values anyway? Why not a local income tax? That would at least take account of ability to pay – consider the case of a pensioner, or someone who is unemployed, living in a house that NOW is worth a lot of money, but which was worth nowhere near that when they bought it. We have a general principle in taxation that taxes should relate to income/ability to pay; I don’t believe that basing taxes on property values follows that principle.
October 4, 2010 at 3:44 am
The Valuation in Ireland had nothing to do with property values but to the return and expected return that they were getting from rents. At the time of calculation it held some reason but within a very few years the imports from the USA, South America, Australia and New Zeeland caused them to be meaningless. Why do you think the Land Acts passed allowing the purchase of farms when the House of Lords still had a veto.
As with the connection between the existence of cheap Canadian grain caused the destruction of the Corn Laws and therefore the change in land use, hence the Famine in the South and East.
On the main point, Scotland is one of the areas that display Exactly why property tax is ridiculous. A Land Value Tax or LVT, so what value could be put on anything inland above the Great Rift. Granted huge estates sell for lotto numbers, but there is no intrinsic VALUE to this land and any ratio between return and number of acres is just so large as to be meaningless. Or what would happen if a town lost a big employer,1000+ people out of work, they move, population drops then Rents drop. The town still needs to surface the streets.
October 4, 2010 at 11:10 am
I agree that the town still needs to provide services even when the local economy collapses, but in the end taxation has to be set at levels that reflect the ability of the taxpayer to pay.
October 4, 2010 at 12:02 pm
Yes, but across the State.
October 5, 2010 at 1:40 am
Wendy: yup local taxes could be based on income or sales. Both are used though usually in conjunction with property taxes. One advantage of property is that it is not moveable. A house in Leitrim (if that is a real place) stays in Leitrim.
With local sales taxes, people drive to neighbouring jurisdictions to do their shopping as indeed people do with the NI border. And obviously you get smuggling too. With income its not quite as bad but you do get people moving. It can also be cumbersome if you live in Dublin and work in Wicklow say. You can also get people falsifying their residence – just give them your aunties address. Again, I know parts of the border where people live on one side for one purpose (say health entitlements) and on the other side for some other reason (schooling or buying a car).
October 5, 2010 at 3:53 am
The central problem with a property, in that property as land & houses, tax is that it needs holds a direct relationship to needs. Local areas will set the tax with their requirements in mind. This is what happened in the UK with the poll tax. Kensington where I lived at the time had both the lowest poll tax and the highest income in that state. Why, they had none of the issues that boroughs poorer had, they sent their kids to private schools and all amenities were used elsewhere. They only slept in the RBK&C.
We would end up with the same scenario if property was taxed. But what could be done is a valuation based on income from that property. Rents.
But there would need to be a addendum which would base a flat rate about twice the average to prevent idle properties and another to preventing people allowing property to rot.