Land doesn't matter any more - again

Sunday, 15 February 2009 22:40
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It is interesting how the arguments against LVT so often have to postulate impossible situations. Here is an example from the Guardian's Comment is Free discussion group, as part of its present campaign against tax avoidance. The point put in favour of LVT was...

"If taxation is tied to the holding of land titles, then it can not be avoided. Everyone uses land. Nor can land be hidden or removed to a tax haven. The tax payable needs to be a proportion of its annual rental value. If this reform was implemented, then tax cannot be avoided."

The response that came back was...

Oh absolutely staggeringly brilliant. So in your system a company that is based on intellectual property - say Google- could rent some premises in the Outer Hebrides and basically pay no tax at all. Marvelous.

This produced two separate counters

"Actually Google has massive server farms that they must put somewhere, so maybe your Google example isn't that appropriate. Of course they could actually put their server farms physically in a tax haven, which would mean that they didn't pay any land tax. Taxing a company like Google is always going to be problematic, as it does genuinely operate as a global operation, so how does one then decide how much tax is due to which country? However, with land value taxation this doesn't matter. If the profits are greater because no tax is paid by the company, then the receivers of those profits will almost inevitably buy larger houses or estates, and hence will pay more land value tax. Even if they don't their additional spending power in the economy will push up house prices, so that the land value tax take increases."
and
"That would not be very practical. Where would they get their specialist staff from if they went to the Outer Hebrides? I doubt if the quality of the network is of the highest there, so it would not be much good even for a server farm, to say nothing of the problems with getting hold of spares and components, all shipped out by Caledonian MacBrayne ferries, weather permitting. Not very convenient for business meetings, either. And the people making a fortune out of Google are unlikely to be content with a croft. The fact that you have had to postulate an impossible set of circumstances is a good demonstration that the concept is fundamentally sound."

And of course if Google did manage to set up its operation in the Outer Hebrides, their staff would soon drive up land values, just the influx of highly paid oil workers drove up house prices when the arrived in sleepy Aberdeen in the 1970s.

 

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