LVT Quick Guide
Land Value Tax: simple, fair, easy to collect, impossible to avoid, and with no exceptions.
Every Labour Party member or supporter should know this information off by heart.
The current system is unfair.
- In South Derbyshire home owners pay over twice as much as those in Chelsea.
- Business rates deter small businesses and are helping to destroy our high streets.
- High land values increase the cost of housing.
- Developers sit on land banks until the price goes up - but they pay no tax on that land.
- Land owners aren't taxed on their land.
In fact, we pay them because land owners get a subsidy from taxpayers!
- The Duke of Buccleuch owns 270,000 acres and pays not a penny on it. He gets £1,600,000 from taxpayers.
- The Duke of Westminster owns 130,000 acres and pays not a penny on it. He gets £835,000 from taxpayers.
- The Duke of Devonshire owns 73,000 acres and pays not a penny on it. He gets £770,000 from taxpayers.
- The Duke of Atholl owns 148,000 acres and pays not a penny on it. He gets £172,000 from taxpayers.
- a new tax - it replaces existing taxes, initially all property taxes.
- a "Land Tax" - it isn't based on area - it isn't a garden tax!
- Simple to understand - all the information is here - no tax lawyers required.
- Fair - those with lots of expensive land pay most.
- Easy to collect - collected nationally and distributed to Local Authorities.
Paid by freeholders not tenants. Freeholders are identified on the Land Registry.
- Without exceptions - all land is taxed the same way. Exceptions breed lawyers.
- Impossible to avoid - you can't hide land in a safety deposit box or in a tax haven.
- A flat-rate percentage tax based on the value of land, not its area.
Value is "open market value" - what someone would pay for it.
Value depends on where it is and what it may be used for.
Agricultural land in East Anglia has a higher value than agricultrual land in Snowdonia.
Building land in Chelsea has a higher value that building land in Swadlincote.
We can't change where land is, but we can determine how it may be used through the planning system.
- How is land valued?
When land is sold on the open market its value is what was paid for it.
The Valuation Office Agency (established 1910) values land and records changes in land value.
So, as soon as agricultural land is "zoned" for development, or gets planning permission, its new value is recorded and the new LVT becomes due immediately.
Zoning, planning permission and taxpayer investment in infrastructure provide a windfall return for land owners - for which they did nothing. LVT provides a fair long-term return for society.
The Jubilee Line extension (1999) increased residential land values within 1000 yards of stations by £13bn; it cost £3.3bn to build. Taxpayers from across the country contributed to the cost but London homeowners benefited.
To quote Winston Churchill:
Boris Jonhson's favourite politician, Winston Churchill, himself descended from a long line of landowners, said:
"Roads are made, services are improved, lights turn night into day, water is brought from reservoirs and all the while the landlord sits still. Every one of these improvements is created by the labour and cost of other people and taxpayers.
Those who own the land contribute nothing, as land owners, and yet the value of their land is increased. The land owner provides no service to the community and nothing to the process by which he is made richer."
- What about land owned by trusts or by companies/individuals in tax havens?
Freeholders are identified on the Land Registry.
A "lien" is placed on the land if they don't pay - so the land cannot be sold or transferred.
Land will be foreclosed and sold to recover the tax if the land value becomes less than the LVT due.
- Will LVT fix everything?
- make thing fairer because those with most will pay most,
- encourage building by making it expensive for developers to sit on land banks,
- reduce land costs and house prices,
- enable Local Authorities to control housing anomalies in their areas.
On it's own it can't fix everything and there are other reforms, including the abolition of trusts and preventing the use of tax havens, that will increase the tax-take from those who can afford it.
The impact of LVT would be even greater if it was also used to replace other taxes that fall more on those with lower incomes - VAT for example.
- Everyone will pay more than Council Tax!
No they won't - despite the numbers plucked from the air by the Telegraph, Daily Mail, Sun and other newspapers owned by tax avoiders.
LVT will cut taxes for most people because it will tax land that has never been taxed before - this will reduce the amount required from those currently paying Council Tax.
LVT taxes land value - so properties built on expensive land will pay more LVT - and those (the vast majority) whose homes are built on less expensive land will pay less. This seems perfectly fair since those who can afford most will pay most.
Norman Tebbit, cabinet member under Margaret Thatcher, said that people should be willing to "get on their bike" to look for work. He was referring to those in areas with increased unemployment resulting from his policies. People have always moved for work - Scottish coal miners provided the labour for the Kent coalfield.
Expensive parts of the country will pay more LVT but nothing prevents people and businesses getting on their bikes and moving to less expensive areas. This can only be a good thing because it brings more jobs to areas that need them,
LVT will be phased in over a number of years to allow people to adjust to it.
- The poor widow living in a large house in an expensive area won't be able to afford it.
She will be no worse off than now because:
- She can pay what she can afford - at least the equivalent of the Council Tax she is paying now.
- She could downsize - but she isn't forced to.
- Unpaid LVT becomes a "lien" on the land and is recovered when the land is transferred or sold.
- All freeholders aren't registered.
The Land Registry holds about 25 million freehold titles worth £7,000,000,000,000 (£7 trillion) and representing 86% of the land area of England and Wales.
Those owning the remaining 14% will be given six months to register their titles.
- It's a garden tax!
No it isn't.
It isn't based on size - your garden can be as big as you like, you can have as many greenhouses, sheds and gardeners as you like.
It can be an overgrown jungle or open for the National Garden Scheme.
It doesn't matter what's on the land (as long as you have planning permission) - the only thing that matters is the value of the land if it was to be sold on the open market - and that depends on where it is and what it can be used for.
- The government won't give Local Authorities what they need.
LVT uses the same percentage rate everywhere so it doesn't make sense for 326 "billing authorities" to collect it. The current local tax system is highly complex and very expensive to administer. It is an inefficient waste of taxpayers' money.
HMRC can collect the tax directly from the freeholder based on the information in the Land Registry. HMRC is good at collecting tax!
The amount each authority needs to meet its legal obligations will be agreed with HMRC. Yes, that will involve negotiations and politics - everything does!
Authorities who wish to spend more on local projects or services may request an addition to the national LVT rate. This will have to be agreed by local taxpayers (at election time) and will be collected by HMRC for return directly to the authority
- It will put up food prices and force farmers out of business.
Supply and demand ("the market") determine prices. Our food supply is world wide so there is a limit as to how far prices can be pushed up.
Land owners (freeholders) may try to force up farm rents but they can only go so far because tenants, who run about one third of all farms, won't be able to make a living and won't be able to pay the rent!
How we support farms, for the production of food or for looking after the countryside and the environment, is up to us as a country - we currently use subsidies to do this and they have nothing to do with LVT.
- Landlords will pass the LVT on to tenants as extra rent.
They can try - but the market will decide. People can only pay so much.
In fact the opposite is likely to happen. Landlords will not be able to recover all the LVT from tenants. This will encourage them to sell thus increasing the number of homes available for purchase.
We could allow local authorities to increase LVT on second homes, holiday homes and holiday lets - that would help local home buyers.
- It will force down the price of land.
Duhh! Is this a bad thing?
Lower land prices mean lower home prices.
Those with large areas of relatively unproductive land will be encouraged to sell to those who can use it better.
- It will lead to uncontrolled development as landowners try to maximise their returns.
No it won't.
Development is governed by the planning system. You can't build a Luxury Executive Housing Estate in front of your stately pile!