SLRG – Focussing on Equality, Shared Prosperity and a Fair Society

Land Tax best for farmers – and everyone else too

In his letter published in this week’s Scottish Farmer, Fife farmer and economist, Duncan Pickard, highlights misconceptions in Reading University’s report to the Scottish Land Commission on Land Value Tax, and explains why land rent as state revenue makes sense at all levels. He writes:

The most notable feature of recent comments about Land Value Taxation (SF. Dec. 15) is the failure to appreciate that AGR/LVT is not an additional tax. It will replace existing taxes.

The multitude of taxes which Sarah-Jane Laing (Scottish Land & Estates) says that landowners currently pay will be simplified to an annual charge based on the rental value of land; Council Tax, Business Rates and Land and Buildings Transaction Tax will go and other taxes could be abolished if politicians have the courage to do so.

The team from Reading and their “panel of LVT experts” were keen to emphasise in their recent report to the Scottish Land Commission, the potential difficulties with adopting LVT; but were reluctant to point out the disadvantages of the current taxes (e.g. £500bn+ UK deadweight losses and moribund marginal communities).

They seemed keen to protect the interests of the construction industry. Why did they claim that one of the main detrimental effects of LVT will arise because those who own land will “make windfall losses” when they are no longer able to make windfall gains from the ever- increasing price of land?

The impression is given that the main impact of LVT will be in rural areas; but the value of rural land is only about 10% of the total value of land. The owners of urban land will contribute about 90% of the LVT even though urban land is only about 10% of the total area. See SLRG’s report to the SLC, Scotland’s Path to Prosperity.

Many years ago the whole of the costs of government were collected from land owners but when they took control of government in parliament they gradually shifted the tax burden onto wage earners.

For the last 30 years investment in landed property has been very profitable, having been given a large stimulus by the sale of social housing at giveaway prices in the 1980s. The imposition of VAT on goods and services as a national tax was begun by France in 1954. Germany was persuaded to adopt it and as other countries joined the EEC, which became the EU, they had to have VAT, which is the most detrimental to employment and trade of all the taxes. Income taxes are bad but VAT is worse. It should be the aim of all who seek national economic prosperity to maximise the standard of living of the people and minimise the costs of doing business. This aim is incompatible with the current tax system.

Although the early advocates of LVT, including Adam Smith and Winston Churchill, limited its scope to the ground on which we stand, the modern interpretation of “Land” extends to all natural resources such as the electromagnetic spectrum (under-collected and therefore capitalised into the profits of communications giants), fossil fuel and mineral reserves. The total amount of taxable revenue available from all natural resources is sufficient to provide for the whole of the national budget and would allow the taxes which inhibit employment and trade to be gradually reduced and then abolished.

There are two countries, Singapore and Hong Kong, which derive most of the money needed for government from ground rent (HK Income Tax as low as 2% They have few natural resources, but have no annual budget deficit and high levels of economic prosperity.

Neither country was examined in the Reading report.

Instead of concentrating on the potential difficulties associated with LVT, all of which have been addressed in numerous scholarly publications, the Reading group should have highlighted the reasons why LVT is not in use everywhere. The main reason is the failure to overcome the claims of those with vested interests in retaining the existing taxes which they have found effective ways to avoid or evade, who are a minority of the population but who possess the loudest, most strident and well-funded voices…to the severe detriment of the rest of the population.

The economic case for LVT is invincible. I fully agree with the view that for LVT to be adopted, people need to be better informed about the failings of the present system of taxation and become acquainted with the advantages of LVT. The subject of taxation should be included in the curriculum of all schools.

Duncan Pickard, Straiton Farm, Balmullo.