New representation new taxation?

Peter Robinson in a written answer (see below the fold) has confirmed that a Land Value Tax is one of the options being examined as part of the rates review. Other areas which apply this model include agricultural land but our present rating system does not. SDLP MLA Declan O’Loan and Ulster Famers Union have stated their opposition to the idea becuase of the potential impact on rural communities.DFP questions here.

Rating of Agricultural Land
Mr D O’Loan asked the Minister of Finance and Personnel what consideration his department is giving to the rating of agricultural land.

(AQW 1034/08)

Mr P Robinson: Under the current rating system agricultural land is not valued nor rated and there are no plans to do so. However as you are aware the current review of the new domestic rating system that was introduced by Direct Rule Ministers in April 2007 is examining a wide range of options for change in the short and longer terms, which were included in terms of reference agreed by the Executive. Strand 2 of the review is addressing longer term issues including possible alternatives to the current arrangements and one such alternative, is Land Value Taxation.

I have commissioned the Ulster University to investigate the experience of other jurisdictions that have used Land Value Taxation as a revenue raising measure and I understand they have shared some of their preliminary findings with the DFP Committee. It is clear from the preliminary evidence provided by the Ulster University that in those countries that apply land value taxation, agricultural land normally forms part of the tax base.

However, their work is not yet complete and therefore no decisions have yet been taken. Once I have had time to consider their full findings and taken the views of the DFP Committee I will bring forward my recommendations to the Executive later in the year.

  • ulsterfan

    What about a hefty tax on vacant dwellings and double rates on holiday homes.
    “One man one house”

  • ND

    That seems like a very good idea to me Ulsterfan.

    NI has a lot of empty homes, and I’ve been told it is possible to avoid rates completely by making an emplty dwelling unhabitable? I may be wrong and in fairness now that house prices are falling so much it is unlikely to be a good bet but is it true?

    However you’ll have trouble finding support for it as the media and public representatives are notorious property bubble merchants generally.

    How many MLA’s are mini property developers? I wonder how many of our socialists have two properties? Do they declare interests in properties?

  • ND

    On point I suppose we just wait for the report.

  • Aquifer

    Land value tax sounds like a great idea. All those vacant housing sites sitting with planning permission in developers’ land banks, empty rotting buildings poxing our towns, lots sold again and again without anything being built, office workers’ car parks. The DSD must have seen this one coming. They built their executive car park as a multistorey one stuck onto the one side of the Clarence Court office block.

    But will ministers upset their housing developer friends?

  • “Land Value Tax”: great in principle, but wait for the impact.

    The original theory was the “unimproved value” of land. That meant a vacant site would be worth £X. Build ten houses on it and each house pays £X/10 each. But …

    They’ve stopped making land. It’s a commodity in short supply. So the value increases. How do we assess value? Well …

    Property values in your street on the up? Watch for your next land tax bill, because (thanks to the Land Registry or the like) values can be (and should be) re-rated annually.

    If it’s flat-rate, that’s a direct percentage of the site value of your home. The snootier the area, the bigger your kick-in, unlike UK Council Tax which is banded (i.e. the less fortunate pay proportionately more).

    Little old widow woman, on fixed pension, still living in the family home? Way-hay! Watch your local politico squirm when she’s on TV, reduced to living on cat-food.

    Notice, too, all the opt-outs: Robinson skirts around the issue of agricultural land. If that’s excluded, the whole thing becomes grossly distorted. That is only the start. Doubtless, aforesaid little old lady will be in there too. Everyone else’s share is upped accordingly.

    According to the experts, LVT can’t be “passed on” in increased prices. You bet? Why does my pint cost more in Kensington than in … anywhere else?

    This one has been debated for 200 years, and all the “experts” think it’s a great idea. That, surely, must be the ultimate warning.

    The real reason why no British administration has introduced it (and it was in the Labour Government’s manifesto back in 1931) is because it requires the urban upper- and middle-class to pay their full share: and they’re the ones who actually get out and vote.

    The bottom line: the only fair tax is income tax.

  • 0b101010

    The bottom line: the only fair tax is income tax.

    I wholeheartedly disagree on that one point; taxing productivity, saving and investment is daft. The only fair tax is a consumption tax.

  • Aquifer

    But land is a productive asset, so is it fair if rich lazy people or old begrudgers hold on to it to stop other people being productive? We are in competition with every other region in the world, so if we leave assets idle, we all suffer. The value of agricultural land can be linked to the value of its produce rather than speculative exchange prices.

    Ownership of land provides both economic security and power. If we leave it out of the tax system the owners are taking from society (armed defense of the national territoty, policing of property rights, environmental protection, opportunity costs of the land not being used more productively) while putting nothing back.

    Privacy and private property rights are linked to political freedoms, but how much property do people need before they impinge too much on the freedoms of others? We effectively need a roof over our heads to participate politically, and government taxes that already! Why should land be a special case? Unless one has a soft spot for landed aristos.

    We could leave land untaxed that is providing public goods. e.g. Space for walking, wildlife reserves, but we should drop the fantasy of a world without limits and pay up for land rights.

    If we rate our agricultural land at zero, do we then pay the africans who are trying to farm desert?

  • Aquifer @ 09:24 AM:

    Fair enough.

    Now apply that to NI.

    The rich lazy people are the big landlords. Do you see the present Executive having the balls to take them on? Then, there are all kinds of exemptions beneficial to the landlord class implicit in Space for walking, wildlife reserves.

    The old begrudgers are those (cliché alert!) hard-working small-farmers, the bedrock of the rural DUP vote. Notice how mealy-mouthed Robinson was about LVT on agricultural land.

    Sorry, but the impression left with me is that the main contributor will be, as usual, Joe Citizen in his three-bed semi.

    In its original concept, all land had the same value, so a flat tax was appropriate. That is nonsense in our present society

    It’s residential land which is buoyant in value, and therefore in tax revenue. Agricultural land becomes suddenly valuable when it’s re-zoned for residential or commercial use. One of the by-products of a LVT is stock-piling land which might be re-zoned at some later date (the Tesco effect: no great change, but even greater motivation there). There is also added pressure on government to re-zone such land, which should worry the NIMBYists. A further consideration is how LVT might affect the re-use of brown-field sites.

    No, it’s not as simple as the theorists imply.

  • We use the land value tax here in my state of Pennsylvania in the US. Having been to NI, I can say that we have many similarities: a rotting infrastructure, a post-industrial reality, and disincentives to build and live in cities.

    One of the cities that uses this is Harrisburg, the state capital. They were on the verge of bankruptcy in the early 1980s, and have now recovered fiscally, stabilized population loss, and most importantly, have seen dramatic increases in small business starts, especially on their High Street. the Mayor, Steve Reed, was voted US Mayor of the Year in 2006. He mentions land tax (called split rate valuation in the article) as an important tool in revitalizing the city.

    I think the agricultural objections are misguided, as it is the decay of cities that makes land values in the rural areas rise, making it difficult for farmers. I know that the move to land value tax in Denmark was actually championed by farmers’ parties.

    It is the urban areas of NI that are in distress. Empty buildings and abandoned commercial districts can be addressed by untaxing the labor and capital that it will take to change things.

    Income taxes are inherently bad as (haven’t you noticed?) those with high incomes avoid them, leaving workers and the middle classes holding the bag.

    Lower taxes to the ground…
    Cheers, Josh