Land Value Tax (LVT) is method of raising public revenue by means of an annual charge on the value of land. The idea is that it is one of the most fundamentally fair ways of raising taxes as land is a common resource, and therefore those who benefit by owning land should compensate the rest of society for having that privilege. The introduction of LVT would facilitate a significant reduction, and in some cases elimination, of other current forms of taxation. As well as the reasons given above, supporters of LVT believe it is also a good system of raising revenue for the following reasons:
1. It will lead to a stronger economy as it will encourage under-utilized land (particularly unused industrial land – or brownfield sites) to be brought into production, and will facilitate a reduction in tax on wealth-creating activities (such as income tax).
2. It will encourage industry in economically deprived areas where land values are lower, counteracting the negative effects of poorer infrastructure away from existing centres of commerce.
3. It will reduce Urban Sprawl as LVT deters speculative land holding, and dilapidated inner-city areas will be returned to good use, reducing the pressure for building on greenfield sites.
4. It is a very simple tax to understand, calculate and collect.
5. Tax Avoidance/Evasion will be impossible as it is not possible to hide land.
6. It will reduce house price booms and crashes as the annual tax that is collected will mean it will no longer be so attractive to speculate on the value of property/land prices.
7. If someone makes money through owning land in an area where land values have increased, they will repay some of their gain to the economy via increased tax.
It should be noted that the value of the land would include any planning permission that had been granted (so greenfield sites would have low tax as their commercial potential is minimal). It should also be noted that the value calculated would be the value of the land only, not the buildings on it.
Though simple to run, moving from our current system to LVT would be very complex, and would involve every plot of land in the country being valued for LVT purposes. Concerns have also been expressed about how property owners with very little cash (e.g. pensioners) would be able to afford it. The exact rate at which LVT would be levied would have to be decided, though figures around 3% annually have been mooted. If anyone is interested in reading more about this they should visit http://www.landvaluetax.org.