Land Value Taxation Campaign

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Frequently Asked Questions about Land Value Taxation

In this section of the web site we have a series of FAQs to help people further their understanding about the application and benefits of Land Value Tax.

If you have any questions at all why not contact us at the LVTC and ask - we can add the answers to this section.

What are the compliance and administration costs of present taxes?

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The costs of tax adminstration and compliance sometimes comes up. This report from the Mirlees Review (table 12.2, page 1128 ) gives figures

PAYE Income tax has an administration cost of 0.7% of revenue and a compliance cost of 1.3% of revenue. Non-compliance adds a further loss of 1.4%. Self-assessed income tax has an administrative cost of 4.5% of yield and a non compliance cost of 14.6%.


Small farmers have nothing to fear from LVT - continued

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To see the effect of LVT on farmers, consider the UK as an example. Under the present regime of taxation on labour, goods and services, residential land, comprising 3.5% of UK by surface area has a rental value of £200 billion a year, commercially used land, comprising 0.4% of the UK by surface area, has a rental value at least £30 billion a year. and farm and forestry land = 80% of the UK by surface area has an aggregate rental value approx. £1.7 billion a year*. Source from UK Government statistics.

Small farmers have nothing to fear from LVT

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Road through fields of stubble
A lively discussion has developed in Sweden around the effect of LVT on small farmers. There are not many of them but they are an influential pressure group. Small farmers in Sweden have traditionally opposed LVT, unlike their counterparts in Denmark. The issue of small farmers also surfaced in Britain a few years ago, at a fringe meeting at an LibDem annual conference.

If LVT is levied on the selling price of land, small farmers would be faced with an unjust burden as land prices, especially close to urban areas, include an element of speculative "froth" which reflects the expectations of future rental growth or the added value of possible development opportunities.

So long as LVT is based on annual rental values, as we propose, there should be no problem for small farmers. For tenant farmers, the tax makes no difference as it cannot be passed on. For owner-occupying farmers, the tax would in most cases lighten their overall tax burden. Owners of marginal land used for grazing and forestry would pay next to nothing. Owners of better quality arable land would pay more, but in the overwhelming majority of cases, they would still be compensated by lower taxes and lower costs, since the cost of labour-related taxes is built into the prices of all goods and services.

Thus, as the Danish smallholders appreciated a century ago when they put their political weight behind LVT, the shift from present taxes to LVT would make small scale farming more profitable, whilst the removal of speculative froth from land prices would enable more people to take up small scale farming as a way of earning a livelihood.

If a broad view is taken, the bulk of land value in any country is in the centres of the most prosperous cities. Thus the effect of replacing existing taxes by LVT is to reduce the overall tax burden on agriculture.

Shouldn't taxes be broad-based?

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One of the arguments used against land value taxation is that "taxes should be broad-based", sometimes expressed as "Why focus on one narrow asset class?"

Clearly, it would be silly to try and raise a disproportionate amount of tax from any one particular "asset class" (cash, buildings, jewellery, works of art, plant and machinery or share prices) as the tax base is insufficiently large to start with, the tax would erode it and the tax would give rise to harmful negative distortions.

Killer arguments against LVT

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All the really silly arguments against LVT are debunked here. No doubt they will be trotted out at tomorrow's second reading of Caroline Lucas's Land Value Tax Bill.

Isn't the UBR already a land value tax?

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We have heard more than a few times that we already have LVT in the form of the UBR. We have even come across this statement in government responses when we have put the LVT case.

True, the Uniform Business Rate is a sort of land value tax, but a very poorly implemented one. Land in residential use is substantially exempt, being subject to the Council Tax instead. Vacant land is exempt. Agricultural land is exempt. All of these things promote mis-use and under-use of land and introduce damaging market distortions. They prevent rents and property prices from dropping to market-clearing levels, thereby promoting both booms and slumps, the latter becoming unduly prolonged when they happen.

Experience with the Enterprise Zones shows, however, that it is not a cost borne by businesses but by landowners. When the tax is relieved, the rents rise to compensate, taking away all of the intended benefit to business. This is why the implementation of LVT could usefully begin with reform of the UBR.

How LVT could be avoided - not

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From a discussion group on the Guardian's Comment is Free
"A design office in the UK designs a widget. They have a three room office in Hull. It sells all over the world for £500 a go. It is made in China, where the vast factory is paid £10 per unit over costs. The UK company makes £300 profit per unit.

Explain to me how land value tax works on this, given you want to get rid of corporation tax and income tax?

Are we really "Single Taxers"

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All taxes must be evaluated according to their likely side effects. The well-known effect of the windows tax was bricked-up windows. But the reasoning behind this tax was the assumption that the number of windows in a property was an indication of the owner's ability to pay.

Those of us who in favour of LVT would not seriously argue that the so-called "sin taxes" should be got rid of. And many existing taxes are in reality land taxes eg parking and congestion charges, mineral extraction dues, receipts from leases of radio spectrum. However,


How does one pay LVT with no income?

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This question arrived by email. "Every now and then I research this and still find no answer: How does somebody pay Land Value Tax if they have no income?"

Why LVT cannot be passed on

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The answer to this question is very simple if you imagine yourself in the situation of a landlord.

As a landlord, I already charge as much as I can obtain for my property. I may decide to charge a bit below top rate so as to avoid it being empty, or I may stick out for the last penny which means I must accept that the property will be empty for 10% of the time. Either way, I am getting as much is I possibly can.

Once LVT is introduced, then I am liable to pay the tax whether the property is occupied or not. So I have a stronger incentive to set the price competitively so as to ensure that it is vacant for as short a time as possible.
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