Transitioning to Lo-Tax: A Sustainable Approach to Land Value Taxation

1. How Lo-Tax (LVT)could be gradually adopted Presentation by William Davison Chair of ALTER

2. What is Lo-Tax • Lo-Tax is ALTER’s brand of Land value tax base value of land or rental value, not property. • Taxes vacant land same as built on plot • Its an annual Tax with regular revaluations • It would replace existing property taxes and not add to the overall tax burden • Lo- is for Location and for a lower tax burden

3. Tax shift: buildings to land • Encourages building upkeep & improvement • Stimulates new construction where needed • Keeps land prices affordable • Discourages urban sprawl by encouraging good site use in already developed areas • Reduces building on green field sites • Revitalises inner cities, 1% LVT = 16% increase in construction

4. Lo-Tax aims to replace 3 Property Taxes • Council Tax is very regressive, highest Band is only 3x lowest Band. • Business Rates while base on rental value is a aggressive tax on Capital values of buildings • Stamp Duty Land Tax is transaction tax that acts as tax on mobility of labour and reduces house sales

5. Lo-Tax proposal 2012 • Replace Council Tax, Business Rates and SDLT • Land value tax = 3.25% on all land not currently covered by Business Rates. • Allowance £4000 per hectare to exclude most Scottish Farmland • Industrial, Business, Retail land taxed at 8% including vacant & derelict sites • 75% of home owners would pay less or no more. • Problem was it could take up to 5 years to setup

6. Reliefs and Transition options • Pensioners could defer payment until sale or probate • Homestead allowance • Allow use of unused tax Income tax allowances against Lo-Tax • Slow transition to Lo-Tax over several years, only effecting the higher value properties • Bottom 4 CT band pay no more than now

7. Implementing LVT & the electoral cycle • Win election or form coalition • Draft legislation, over come Treasury objections • Debate legislation, overcome House Lords • Perform Valuations on 28m+ properties • Calculate reliefs and review appeals • Usual government IT project, late/over budget • Early teething problems & attacks in the press • Finish all that just in time for the next election

8. Council Tax to LoTax Step 1 Change Council Tax so it’s charged to the landowner, rather than the tenant. • Collection will be easier and more efficient for councils. • Landlords will be able to pass the tax on to the tenants through increased rent, at least at first… • It will mean that the landowner will pay tax even on empty properties, encouraging them to attract tenants.

9. Council Tax to LoTax Step 2 Replace the top tiers of Council Taxwith a 1% rate Location Tax • Only a limited number of properties (>1%)will need to be surveyed and valued. • As only the location will need to be valued, detailed surveys of buildings won’t be needed. • Only the richest will be affected at first. • The money raised can be used to scrap or reduce Stamp Duty, making it easier to buy and sell properties.

10. Council Tax to LoTax Step 3 Progressively replace more CT bands with Lo Tax while raising the rate • Adding new properties gradually will allow time to build up the valuation infrastructure required. • The rate can be gradually raised to 3-5%. • Revenues raised can be used to reduce taxes on income. • Extend to and land with residential planning permission, to discourage land banking and encourage development. • Council Tax would be replaced by the Location Tax.

13. Advantages over previous Land Value Tax Implementation proposals • Lo-Tax can be introduced within 12 months of it becoming legislation • Only Band H properties (>1%) will need valuing in the year 1. • 5% properties in Year 2, 8% in Year 3 etc… • Scrap SDLT in Year 1 to reduce risk of falls in property & land values • More Land Tax could raised in a shorter timescale with this method • Can cut income Tax in year 2, 95% pay no extra property tax • Larger and faster income tax cuts are possible much earlier • Vacant land will be tax from Year 1and will have been developed by the time lower Council Tax bands see increases • If landlords try to pass on tax, in early years most tenant pays no more than the cut in Council Tax

14. Key Elements of LVT Implementation • Establish a valuation method (Geographic Information system) • Appeals process • Collection method (Government IT project) • Limited, but reasonably large rollout

15. LoTax Lite • Mansion Tax, a land value based tax to replace the top Council Tax band H • Use the revenue raised to abolish or reduce Stamp Duty Land Tax. • Vacant Land/Empty property Tax • Use revenue to offer businesses option to pay LoTax instead of business rates. • Marginal Business Land Tax- Acts like a national enterprise zone on low value land • Establishing valuation, appeals and collection methods for future full LoTax

17. Questions? • Join ATLER on web ww.libdemsalter.org.uk • Facebook: www.facebook.com/libdemsalter • Twitter: @libdemsALTER

19. 40% of wages cost are paid to the government on pay over £10,000