How land value tax should be applied to land subject to a mortaged was discussed in a talk given by Gavin Putland to the International Union for Land Value Taxation at its conference in April 2010. The text can be downloaded here

The tax is payable on all land, with no concessions, allowances or thresholds. Allowances have the effect of reducing the amount of existing taxes that can be abolished. Thresholds could, in addition, lead to avoidance by sub-division of land plots.

The rate of tax is set nationally and at the same rate for all classes of land. Local authorities should not be free to set their own rate of LVT. There is too much variation on land values from one area to another, for example, between Ashford and Ashington. Local authorities should, however, be entitled to a proportion of the land value tax raised within their areas, to give them some incentive to carry out projects that enhance land values. How this can be done equitably needs futher consideration. The bulk of local authority revenue, other than that raised from direct charges on services, should come from the national LVT revenue pool, probably on a capitation payment basis.

Assessments should be on annual values. Superficially, capital value assessment is an easy option but it is full of pitfalls. It goes against the entire principle of LVT which is the collection of the rental value of land as public revenue. The selling price of land titles is only loosely related to the value that LVT is actually trying to collect. Built into this price are factors such as present interest rates and expectations extending far into the future, including changes in interest rates, the general economy, and possibilities of development consents. To levy a charge based on the selling price of land is to attempt to tax a value which cannot be realised without liquidating the asset. Not only is it fundamentally unjust; it also gives rise to practical difficulties of valuation as it is necessary to make assumptions about future planning policy. To propose capital value assessment is to solicit unneccessary opposition. It is not a logical precursor to annual value assessment.

All land is subject to the tax This includes land in agricultural use and non-market uses such as affordable housing. Land should always be valued at its true value and the tax should be payable. Where land is occupied by social housing, then the local authority or housing association should be liable for the tax. In principle, this tax should be paid, even though some or all of the amount is subsequently reclaimed as a rebate, or an equivalent arrangement made in the way that was most efficient from an administrative point of view. The important point is that any subsidy should be identifiable and open to audit.

Valuation must be frequent The maximum time between full valuations should be five years. Rolling revaluations based mostly on statistical date should take place annually.

I work away from home all the time and basically live out of a hotel all week. I only use my house at the weekend (which is for sale anyway). When I sell, I'm considering staying in hotels permanently.

So under LVT would I effectively be paying no tax?

It has been suggested that the house price (land price) bubble could have been prevented by a Capital Gains Tax. There is also a feeling that capital gains, on, for instance, share transactions, should be taxed as they are an unearned profit. So shouldn't we be supporting them?

“Rent of Talent”, a notion that grew up some time around the 1900s, has cast a fog of confusion over the term “Rent”. The talents in question were those of opera singers, sportsmen, and the like. The argument went that if land rent should be taxed, so should natural talent, thereby opening up the case for progressive income taxes. This helped the landowning interest, as it diverted attention away from their own privilege. But “rent” is the wrong term for the these high earnings.

We want your views

A difficulty with any form of local taxation is that resources and needs do not match. Consider, on the one hand, the London boroughs of Westminster, and on the other, boroughs such as Haringey, Lewisham and Newham, just outside the central area. In Westminster are to be found Parliament, major centres of shopping and employment, and some of the most sought-after residential areas of the capital. The latter boroughs include some of the poorest people in the land. In Westminster, there are many possible taxes that would easily raise sufficient revenue to pay for public services, and probably at quite a low rate. In Haringey, Lewisham and Newham, there is no possible tax that could produce the revenue. This problem is usually described as a mismatch of needs and resources. It has usually been solved by some kind of equalisation scheme in which funds are collected centrally and redistributed according to need, using some formula or other.

Land value taxation would suffer from precisely the same problem if used as a local tax,

Partly as a result of the discussions that have been taking place under the sponsorship of the Coalition for Economic Justice, of which the Campaign is a member, we have had further thoughts on how LVT might be introduced. The concern that has been expressed centres around the role of local taxation. Put simply, there is a lot of land value in some local authority areas and very little in others, and this is unrelated to the costs of providing the services. The highest rates of LVT would have to be levied in the poorest areas. It has long been recognised that there would be a need for an equalisation scheme to redistribute the revenue, a problem that applies to any tax; the same would be true, for example, of local income tax or local sales tax.

We put forward here for discussion a radical solution: capitation payments which the authorities would be free to spend as they wished - a kind of reverse poll tax. What are the objections? Is it undemocratic? Is it unjust? Please give us your views. Read our proposals here

Yes. It would transform them. It is not the least of the beneficial effects of LVT.

From the "Guardian's Comment is Free" website, this must surely deserve some sort of prize as the absurdest-ever argument against LVT

"So someone who earns £1million a year and owns no land (or lives in a small flat) pays no tax, and a pensioner on nothing but the state pension who happens to live in an average house in Battersea, inner London, that he bought for £200 in the 50s would pay loads of tax?"

One could also avoid LVT by living rough. If there was LVT, would the homeless people who are living under the sea front at Brighton be joined by millionaires who were avoiding the LVT they would have to pay if they remained in their houses in Kensington?

The fact that the commentator had to postulate an almost impossible situation supports the case beautifully.

LVT advocates tend to hold back through fear of an angry reaction from homeowners, but consider this. Most land value is in land used for productive purposes, that is, land used for wealth creation other than agriculture. That must be so. The most productive land is not used for housing. But the value of land in commercial use is presently depressed by taxes that fall on business. The chief amongst these are taxes nominally paid by labour such as Income Tax, NI and PAYE, as well as VAT, but whose burden actually falls on employers, forming part of their labour costs and depressing their profits. Were these to be removed, business profits would rise sharply and with them, the ability of business to pay higher rents. A further factor depressing the price of land used for commercial purposes is that a significant proportion of land rental value is collected already, if inefficiently, through the Unified Business Rate (UBR), which would be superseded by LVT.

Thus, as existing taxes were phased out, the rental value of land in commercial use must rise sharply, and with it, provided that LVT is phased in gradually and valuations are frequent, the share of LVT collected on such land in relation to the total from all land.