Saturday, January 7, 2012

The Sunday Herald: How land tax reform could unlock (pounds) 50bn

Herald and the Sunday Herald, The (Glasgow, Scotland) - Sunday, October 5, 2003
IMAGINE that we paid no tax at all except a levy based on the annual rental value of our land. Would we be better off? The answer, according to leading land experts, is yes - considerably. Ronald Banks from the Centre for Land Policy Studies has estimated that everyone in Scotland would gain an average of nearly (pounds) 10,000 a year, and the Scottish economy would be approaching (pounds) 50 billion richer.

Land reform campaigners, however, have been reluctant to advertise these figures because they fear that people will not believe them. The financial advantages of introducing such a radical change in the system of taxation simply seem too good to be true.

But an increasing number of specialists, pundits and politicians are beginning to grasp the idea of land value tax , and see the tremendous advantages it could bring. ''There's a big revolution coming in the way we raise public revenue,'' argues Peter Gibb, chief executive of the Henry George Foundation, a land reform think tank in Edinburgh.

''New economic thinking shows that we have to stop taxing good things, like people working or exchanging their goods. Instead we have to start charging those whom we allow to monopolise our finite common resources. We have to charge them for their privileges, and compensate us for what we've lost,'' he says. ''In 20 years time I don't think we'll have anything like a base rate of income tax , nor any VAT. But until tax policy changes, we're stuck with the seemingly intractable problems of relative poverty, homelessness, and environmental blight.''

Gibb points out that a land value tax would make it much more difficult for rich landowners and property developers to dodge taxes by creating complex networks of companies in foreign tax havens. ''Land has one certain advantage over anything else you might think to tax : you can't hide it,'' he says. He argues that major landowners should lose their exemption from rates and be obliged to pay a tax on every hectare they own, based on rental value. ''This would be a persuasive stick for land needed for community use, but blocked by self-interested landowners, to be quickly released.''

The financial writer and novelist, Antonia Swinson, has become an enthusiastic convert to the cause of land value taxation. Her book, ''Root Of All Evil?'', published earlier this year, makes a passionate plea for reform.

She points out that in Scotland two thirds of the land is owned by just 1252 families. ''Land is the ultimate reality behind money. It is where real power and influence lies. That is why, as soon as people make money, they buy land and keep others off it,'' she says. A land value tax , like the ''community chest'' in the game of Monopoly, is a way of ending landowners' monopoly on wealth. The power of landowners is, she claims, ''the biggest scam I have ever written about''. ''It is one which costs all of us in the UK lots of money every day of our lives, robs us from putting aside adequate money for our old age, and conditions our entire national psychology.''

The first stage of reform, which is within the power of the Scottish Executive, would be to replace council tax and business rates with a land value tax . The momentum behind the idea is gathering pace with the Executive under pressure to take it seriously. Both Labour and the LibDems agreed to review local government finance and the Green Party is pushing for the inclusion of the land value tax option. A Green motion in favour of land value tax being considered was passed by MSPs in January because Labour members abstained en masse.

The Executive, however, seems distinctly unenthusiastic. ''The Executive has no plans to investigate land value tax ,'' a spokesman said. ''Land taxation is no panacea - if it were, it would be used universally. Property taxation is virtually universal because it is stable, predictable and comparatively easy to administer.''

But this attitude strengthens the determination of the Greens to ensure that the promised inquiry into the financing of local government encompasses land value tax . ''It should be a wide-ranging review that looks at all aspects,'' says Mark Ballard, Green finance spokesman.

''For the Executive to try and close off discussion of innovative ideas would be a mistake. It would be an unforgivable missed opportunity.'' There are examples of land value tax in Australia, New Zealand, South Africa, Denmark and some states in the US.

Landowners too are suspicious of any new tax , pleading poverty. ''Highland estates have inadequate income to meet their rising costs,'' claims tax adviser to the Scottish Landowners' Federation, David Collier. ''There are no soft targets for tax any more.''

But, if some rumours are true, such doubts could be about to be swept aside. There are intriguing signs that ministers in Westminster are seriously considering a form of land tax .

In June, Deputy Prime Minister John Prescott hinted that the government was examining ways of taxing the increased value of land caused by public investment. There is even speculation that Chancellor Gordon Brown may say something in this autumn's Budget.

Rob Edwards