Download Case for LVT

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 valued
for 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
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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
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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
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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
LVT helps achieve policy
objectives
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Reduce inflation
Reduce unemployment
Redistribute income and wealth
Regenerate urban development
Protect the environment
Achieve stable growth in the economy
LVT helps reduce inflationary
pressures
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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
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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?