- The current system
- Keep it simple!
- The real world: long term and short term stages
- Tax revenue 2019/2020
- An introduction to LVT
- The Brexit dividend
The current system
What sort of tax system to do we have when:
- page after page on the government's own web sites advise people to "talk to your financial advisor"?
- tens of thousands of "tax advisors" make a living telling people how to avoid tax?
- local authorities and citizens advice charities employ staff to ensure people "take up their allowances"?
The answer is: a system that is far too complex and designed to protect wealth.
Tax can be both fair and simple - it is currently unfair and complicated.
Keep it simple!
Our aim is to simplify the tax system, and to make it fair, while bringing in at least as much as the current system to pay for all the things we need: health service, education, etc.
A complicated tax system is full of loopholes and easy to fiddle. Some of our best brains are wasted finding ways to avoid tax - we would prefer those brains to be used for the social good.
A simple system doesn't require "allowances" or "exceptions" or tax advisors.
Simple is best
The simpler something is, the harder it is to find ways round. A few years ago a famous tennis player had a contract with his manager. The contract said:
"Mr A agrees from this date onwards to pay Mr B x% of all future earnings made by Mr A in return for Mr B acting as Mr A's agent."
That was it - duly signed and witnessed. No get-out clauses, no "ifs" or "buts", no end date, no pages of definitions.
Mr A tried to get out of the deal - and failed!
Lawyers argued about it (and they still argue about it) as their fees rise higher and higher.
The real world
We live in the real world and giant steps take time. The changes we propose will have to be phased in over time so people get used to them and can plan for the future. We therefore have long term and short term plans.
We plan to scrap:
- all tax on earned income - income earned through work.
For most people "earned income" is effectively what is now covered by PAYE - what you earn for doing your job. We want you to keep everything you earn from working.
VAT is a regressive tax - those on lower incomes pay a larger part of their income in VAT than those on higher incomes. VAT is also a tax on sales - products cost more than they need to so fewer are sold.
Abolishing VAT, along with tax on earned income, will act as a major economic stimulant - people will have more money to spend. Coupled with restricting imports from cheap-labour countries this will also stimulate new UK manufacturing.
- Council Tax and Business Rates.
Council Tax is grossly unfair. Those in South Derbyshire pay almost three times as much as those in Westminster for homes in the same tax band. Business Rates are a disincentive to business.
- Stamp Duty.
Why should you pay an additional tax when you buy your home? Stamp Duty was just another way for governments to generate revenue.
- Inheritance Tax.
There will be no death tax.
We will replace all these with:
- UIT: Unearned Income Tax.
UIT is income other than that received for doing a job. In most cases it equates to non-PAYE income.
- LVT: Land Value Tax.
LVT is a tax on the market value of land - not on the land itself, not on gardens!
LVT is simple, fair and unavoidable.
For more about LVT please visit this site.
Tax revenue 2019/2020
The table below shows national and council revenue in descending order of value.
The value of each tax is also shown as a percentage of the total.
The "LVT % required" column shows the LVT rate required (as a percentage of the total value of all UK land) to replace this tax. Calculating the LVT rate is something an average year 10 pupil could do with a calculator.
Let us assume:
- R = revenue currently generated from taxes to be replaced: £0.0316 trillion from Council Tax.
- V = total open market value of all land in the country: £5 trillion.
The equation is simple:
In Derbyshire developers are paying about £1,250,000 an acre for land on which they build 25 houses. The land value of each house is therefore £50,000.
- A rate of 0.632% would allow us to scrap Council Tax.
- A rate of 3.265% would allow us to scrap Council Tax and VAT.
- A rate of 7.120% would allow us to scrap Council Tax and VAT and Income Tax.
- A rate of 13.837% would allow us to scrap all current taxes. (We are not proposing this.)
Very important warning about these figures
Assuming we start by replacing Council Tax and Business Rates, we have accurate figures for how much these bring in for England. The other figures in the list above relate to the UK as a whole.
We don't have an accurate figure for the total open market value of land in England. This will be found when the Land Registry has completed its work and when open market values have been established by the Valuation Office Agency
Our valuation, £5 trillion, is based on published guestimates which may or may not be correct.
You can use the spreadsheet to try lower or higher land values.
- Source for national taxes
- Source for Council Tax and Non Domestic (Business) Rates
- Copy of the spreadsheet and chart in Open Document format (as used by the UK government.)
An introduction to LVT
For full details about LVT, including an FAQ and answers to possible objections, please visit this site.
LVT is paid by the freeholder, not by tenants.
LVT is payable on all land in the UK and on land outside the UK owned by UK citizens, UK residents or UK companies.
LVT is the simplest of all taxes because it is exactly what it says on the tin - a tax on the current market value of land. It is not "a garden tax" as in parts of the national press!
What is the value of land?
The value of land is what someone would pay for it if it came on the open market.
It domestic property it is the answer to this question:
Two things determine the value of land: what it can be used for and where it is:
- An acre of agricultural land on a rugged hillside in Snowdonia will have a lower market value that an acre of rich fertile land in East Anglia.
- Ten acres of land in Derbyshire with planning permission for 250 house will be worth more than the same land used for agriculture. By giving planning permission we (society) have increased the value of the land 100 times (from about £12,500 to £1,250,000 an acre) - a windfall to the landowner for doing absolutely nothing.
- A building plot with planning permission for a three bedroom house in Doncaster will have a lower market value than a similar building plot in the centre of London.
Taxing the value of land has other advantages:
- We know where it is, we can see it - it doesn't move about!
- It can't be hidden in a safety deposit box in Switzerland or in a bank account in the British Virgin Islands.
- We know who has to pay the LVT - the freeholder as recorded by the public Land Registry.
LVT will also apply to land outside the UK owned, directly or indirectly, by UK citizens, UK residents or UK registered companies.
A Danish landowner in Scotland currently pays LVT to Denmark and, to prevent double taxation, can deduct any property taxes he is paying in Scotland - which are zero at the moment because Scotland does not have a Land Value Tax. Danish children enjoy better Danish schools because of tax paid on the value of land in Scotland.
A UK citizen owning land in the British Virgin Islands will pay LVT on the open market value of that land.
- The amount of tax changes if the value changes. Today sheep, tomorrow 600 homes - the value goes up so the tax goes up.
- If people don't pay, or can't pay, a "lein" (a debt to be paid, with interest, when the land next changes hands) is recorded by the Land Registry - just as it is when you take out a mortgage.
How do local councils get their money?
Good question. The LVT rate is the same everywhere and, for reasons of obvious efficiency (and to save money), it is collected nationally. So, how do councils get the money to do what they are legally obliged to do?
The question is answered in depth here.
How much LVT would a typical home pay?
Farmland with a value of about £12,000 per acre will suddenly become worth £600,000 - £1,000,000 an acre with planning permission for housing. What has the landowner done to "earn" this? Nothing.
Theoretical housing density in the UK is about 45 per hectare - about 18 per acre.
The value of the land under each house will be between 600000 / 18 = £33,333 to 1,000,000 / 18 = £55,555. This is the value on which LVT will be calculated.
Practical housing density on new residential developments is is about 31 per hectare, 12.55 per acre.
In this case the value of the land under each house will be between £47,808 and £79,681.
This is an advertisement for a plot of building land for two dwellings in the centre of England in a "sought after" village. The market value of the land for each dwelling would be £90,000.
Assuming LVT replaced both Council Tax (0.632% from the table above) and Business Rates(0.512%), LVT would be:
A band D home in Lutterworth paid £2753.18 Council Tax in 2020/2021.
Note: large developers purchase land in bulk and in South Derbyshire the cost of land per dwelling on a new housing development works out at about £50,000 per home.
For more about LVT please visit this site.
We all need time to plan for new taxes so the first step will be to replace all property taxes with LVT, to scrap inheritance tax and use UIT to replace all tax on earnings below the national household median (£30,800 in 2020).
Unfortunately some people will try to avoid tax by converting unearned income into earned income - hence the initial cap. However, we will use some of the expertise from newly liberated tax advisors to prevent fiddling so we can remove all taxes from income earned through work. Our aim is to leave all your earned income in your pocket.
Obviously by replacing only these taxes the LVT rate will be fairly low.
LVT will replace property taxes over 5 year so by the beginning of year 2 LVT will have replaced 20% of property taxes.
The next step will be to gradually scrap VAT while increasing LVT to make up the balance.
The Brexit dividend
One of the advantages of becoming a sovereign country following Brexit is that we don't have to wait for the EU when it comes to taxation.
We can now:
- Define our own list of tax havens (see below ).
- Stop the use of tax havens by UK citizens, UK residents, UK registered companies and non-UK registered companies who trade in the UK.
Even Rishi Sunak, as UK Chancellor, set up one of his own companies in the Cayman Islands to avoid tax!
Those with funds or assets held directly or indirectly in tax havens will be given six months to repatriate those funds and pay any outstanding tax on them. It will be a criminal offence to deposit or retain funds in a tax haven and, if found guilty of doing so, 100% of the funds will be forfeit.
- End "non dom" status (enjoyed by people such as the owner of The Daily Mail) which allows UK citizens and residents to avoid tax by pretending they are "not resident in the UK for tax purposes".
- End dual nationality status - it should not be possible to pick and choose where your social responsibilities lie.
By default children acquire the citizenship of the country in which they are born but we feel that, by mutual consent, your parents may choose for their children to have the same citizenship as themselves. If you are born in Spain, but one or other of your parents is a UK citizen, you are Spanish by default but you can become British if both your parents agree.
- Ensure that all UK citizens, UK residents and UK companies pay UK tax no matter where they live/operate or where their earned or unearned income comes from. There will be provision to prevent double taxation. If you live and work in Spain you may deduct any taxes you pay in Spain from taxes due in the UK.
- Ensure that all non-UK registered countries who trade in the UK also pay tax in the UK.
UK citizens who do not wish to honour their social responsibilities by way of paying tax are free to settle their affairs with HMRC, give up their UK citizenship, surrender their UK passports, leave the UK, forfeit all rights enjoyed by UK citizens and become citizens of any country of their choice.
Don't pay - don't stay.
Countries defined as tax havens
The UK is the world's largest tax haven
As far as the rest of the world is concerned, the UK, its crown territories and it dependencies are the world's largest tax haven. Monaco is a poor relative.
One look at the amount of money laundered through UK banks, and invested in UK property, makes this clear - let alone the billions buried in The Cayman Islands, The British Virgin Islands and all the other tax havens associated with the UK.
Russian oligarchs, rich Arabs, dictators and corporate thieves pick London for a good reason - it is easier to avoid personal and company tax in the UK than anywhere else in the world.
There is an obvious reason for this. The British legal system was established by wealthy landowners to protect their wealth (that's what Magna Carta and the Civil War were all about). Parliament was created by landowners to protect wealth, lawyers came into existence to protect wealth and the public school system is designed to turn out people who will continue to protect wealth.
There are about 38 million people in work or seeking work in the UK. There are 135,000 solicitors in the UK (0.36%) and 16,000 barristers (0.04%). In 2015 61% of UK MPs came from "the professions" or business with 14.2% being solicitors or barristers.
The registration of any company or legal entity, by a UK citizen, UK resident or UK registered company, in any country in the world with a lower level of corporation tax than the UK, shall be considered an attempt at tax avoidance unless it can be shown, to the satisfaction of HMRC, that it is for the genuine purpose of trading in that country and will not result in loss of tax revenue to the UK.
The top 15 are described here.
These countries are assumed to be tax havens unless, in the opinion of HMRC and the UK government, they can be used without suspicion of avoiding UK tax.
Antigua and Barbuda
Belize: almost owned by multi-million pound Tory donor, Lord Ashcroft.
Bosnia and Herzegovina
British Virgin Islands: including Necker island.
Cayman Islands; a favourite of the UK chancellor.
Isle of Man
Ireland: as used by Apple and by Jacob Rees-Mogg.
Liechtenstein: as used by some Labour Party members.
Luxembourg: used by Amazon and many others.
Monaco: a very crowded place swarming with tax avoiders. Even decent people get greedy as they get richer.
Panama: as revealed in The Panama Papers.
Saint Kitts and Nevis
Saint Vincent and the Grenadines
Trinidad and Tobago
Turks and Caicos Islands
United Arab Emirates
US Virgin Islands