Land Value Taxes
Years ago, before there was such a thing as Liberal Democrats or the Poll Tax or Council Tax, the Liberal Party had a policy to replace the rates with something called Site Value Rating. SVR really didn’t get the pulse racing and was widely confused with STD (a way of ringing someone up in another town without going through the operator) and STV, a form of proportional representation.
But it was a good idea then and it’s a good idea now.
You are taxed for the value of the land you occupy, regardless of the value of any buildings on it. For the Liberals back in the day it dealt with the problem that if you put a bathroom, or an inside lavatory, in your house, your rateable value would go up and you’d pay more rates – which was one reason the rates were so unpopular.
Land value taxes, or Site Value Rates, are fair. Land value is created as much by the community around you as by your occupation of the site. If you get planning permission for a new whatever, the land value goes up. You are taxed for that increase, but not for the value you put in when you build the new whatever.
But they suffer from the same problem, subjective determination, that I outlined in my previous post about wealth taxes. However, it is manageable, because we are only dealing with one class of asset rather than anything from shares to thoroughbreds. There is an established land valuation profession, and a government agency, the Valuation Office Agency, that does it all the time for other tax purposes. So although it’s complicated, and will create something of an opportunity for tax advisers, it’s doable.
However, there is one thing that must be done with the new tax, and that’s that revaluations should be continuing, with values always indexed to a taxable date in any year. Rates revaluations were always politically contentious and they kept on being postponed until domestic rates were abolished. There’s still a big issue with business rates and the delayed business rates revaluation is having a bad effect on the high street. If revaluations are ad hoc, it will create all kinds of problems.