A Land Value Tax for Wales?

Mark Drakeford AM has called for the Silk Commission to consider the case for a Land Value Tax as part of its deliberations on whether tax raising powers should be devolved to Wales.

Leading a short debate in Plenary this week on ‘A Land Value Tax for Wales’, Mr Drakeford said that a tax based on land value has many merits and is worthy of detailed investigation into its pros and cons.

Land Value Tax (LVT) is levied on the annual rental value of specific pieces of land where the where the value is determined by different usages, for example, agricultural and industrial land.   At its most radical, it could allow for the abolition of Council Tax, Business Rates and Stamp Duty Land Tax, by introducing a levy on the annual rental value of every site in the UK including all residential, commercial and farming land, as well as privately owned estates.

Supporters of LVT say that one of the main advantages of LVT is that it is difficult to avoid because it’s hard to hide land or move it offshore to avoide getting taxed. Economists such as the OECD’s argue that LVT also increases long-term stability and growth by fostering more productive use of capital and also stablises government finances by bringing in revenue efficiently and quickly. It is also a progressive tax which imposes a lower burden on the poor than the rich.

Other advantages are that LVT is relatively cheap to collect as well as difficult to evade.  It discourages speculative land holding and encourages active use of land, creating more job opportunities and wealth.

LTV is already used in some countries. In Australia, LTV exists in some form in every state while Russia has used a form of LTV in the post-communist period. In the UK there is detailed work already carried out on the applicability of a LTV in particular contexts. Oxford unitary authority has a report already prepared on its utilisation; Scotland has a Land Reform Policy Group and Glasgow City Council has, over the past two years, been actively considering such a tax

An LVT could also pay for many other much-needed infrastructure schemes.

Research into the practical application of LVT has calculated that the Jubilee Line extension to Stratford raised property values around the stations by £10 billion. If only a small part of this windfall had been taxed, it would have paid for the extension very easily. Similarly, those whose sites have declined in value, if blighted by other development for example, would pay less.

Mr Drakeford said: “The whole future of responsibility for taxation is very much a matter of current debate and we must not underestimate the problems of tackling taxation, especially in an economic downturn.

“Nevertheless, an LVT has an impressive economic and political pedigree with supporters across political parties including some UK Government Ministers. It is the official policy of the Green Party in Scotland where research carried out, late in 2010 suggested that a land value tax of 3.16p per pound would generate enough cash to replace council tax and the uniform business rate, while leaving 75% of Scottish households better off in the process.

“LVT is also an idea with a strong Welsh pedigree. The idea was first seriously advanced by Keir Hardy in his 1906 election manifesto and then a key part of Lloyd George’s original ‘People’s Budget’ of 1909. Now, in the era of devolution, there may be chance for their uncompleted work to be brought to a conclusion in Wales.”