What are the essential features of a sound LVT?

Tuesday, 11 May 2010 10:14
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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.
 

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