How Lo-Tax LVT could be gradually adopted Presentation by

How Lo-Tax (LVT)could be gradually adopted Presentation by William Davison Chair of ALTER

What is Lo-Tax • Lo-Tax is ALTER’s brand of Land value tax base value of land or rental value, not property. • Taxes vacant land same as built on plot • Its an annual Tax with regular revaluations • It would replace existing property taxes and not add to the overall tax burden • Lo- is for Location and for a lower tax burden

Tax shift: buildings to land • Encourages building upkeep & improvement · Stimulates new construction where needed · Keeps land prices affordable · Discourages urban sprawl by encouraging good site use in already developed areas · Reduces building on green field sites · Revitalises inner cities, 1% LVT = 16% increase in construction

Lo-Tax aims to replace 3 Property Taxes • Council Tax is very regressive, highest Band is only 3 x lowest Band. • Business Rates while base on rental value is a aggressive tax on Capital values of buildings • Stamp Duty Land Tax is transaction tax that acts as tax on mobility of labour and reduces house sales

Lo-Tax proposal 2012 • Replace Council Tax, Business Rates and SDLT • Land value tax = 3. 25% on all land not currently covered by Business Rates. • Allowance £ 4000 per hectare to exclude most Scottish Farmland • Industrial, Business, Retail land taxed at 8% including vacant & derelict sites • 75% of home owners would pay less or no more. • Problem was it could take up to 5 years to setup

Reliefs and Transition options • Pensioners could defer payment until sale or probate • Homestead allowance • Allow use of unused tax Income tax allowances against Lo-Tax • Slow transition to Lo-Tax over several years, only effecting the higher value properties • Bottom 4 CT band pay no more than now

Implementing LVT & the electoral cycle • • Win election or form coalition Draft legislation, over come Treasury objections Debate legislation, overcome House Lords Perform Valuations on 28 m+ properties Calculate reliefs and review appeals Usual government IT project, late/over budget Early teething problems & attacks in the press Finish all that just in time for the next election

Council Tax to Lo. Tax Step 1 Change Council Tax so it’s charged to the landowner, rather than the tenant. • Collection will be easier and more efficient for councils. • Landlords will be able to pass the tax on to the tenants through increased rent, at least at first… • It will mean that the landowner will pay tax even on empty properties, encouraging them to attract tenants.

Council Tax to Lo. Tax Step 2 Replace the top tiers of Council Tax with a 1% rate Location Tax • Only a limited number of properties (>1%) will need to be surveyed and valued. • As only the location will need to be valued, detailed surveys of buildings won’t be needed. • Only the richest will be affected at first. • The money raised can be used to scrap or reduce Stamp Duty, making it easier to buy and sell properties.

Council Tax to Lo. Tax Step 3 Progressively replace more CT bands with Lo Tax while raising the rate • Adding new properties gradually will allow time to build up the valuation infrastructure required. • The rate can be gradually raised to 3 -5%. • Revenues raised can be used to reduce taxes on income. • Extend to and land with residential planning permission, to discourage land banking and encourage development. • Council Tax would be replaced by the Location Tax.

Lo-Tax rates by year and Council Tax band Land Value % = LVT rate % of property Year 1 Year 2 Year 3 Year 4 Year 5 CT Band 1. 00% 2. 50% 3. 00% 3. 50% 22% A £ 766 £ 766 23% B £ 894 £ 894 23% C £ 1, 021 £ 1, 021 27% D £ 1, 149 £ 1, 304 30% E £ 1, 404 £ 1, 664 £ 1, 942 33% F £ 1, 660 £ 2, 056 £ 2, 467 £ 2, 879 36% G £ 1, 915 £ 3, 068 £ 3, 835 £ 4, 602 £ 5, 369 39% H £ 3, 136 £ 6, 271 £ 7, 839 £ 9, 407 £ 10, 975 Income tax cut 0% 1% 1% 2% 3% Basic rate 20% 19% 18% 17% Higher rate 40% 39% 38% 37%

Advantages over previous Land Value Tax Implementation proposals • Lo-Tax can be introduced within 12 months of it becoming legislation • • Only Band H properties (>1%) will need valuing in the year 1. 5% properties in Year 2, 8% in Year 3 etc… • Scrap SDLT in Year 1 to reduce risk of falls in property & land values • More Land Tax could raised in a shorter timescale with this method • Can cut income Tax in year 2, 95% pay no extra property tax • Larger and faster income tax cuts are possible much earlier • Vacant land will be tax from Year 1 and will have been developed by the time lower Council Tax bands see increases • If landlords try to pass on tax, in early years most tenant pays no more than the cut in Council Tax

Key Elements of LVT Implementation • Establish a valuation method (Geographic Information system) • Appeals process • Collection method (Government IT project) • Limited, but reasonably large rollout

Lo. Tax Lite • Mansion Tax, a land value based tax to replace the top Council Tax band H – Use the revenue raised to abolish or reduce Stamp Duty Land Tax. • Vacant Land/Empty property Tax – Use revenue to offer businesses option to pay Lo. Tax instead of business rates. • Marginal Business Land Tax - Acts like a national enterprise zone on low value land • Establishing valuation, appeals and collection methods for future full Lo. Tax

Questions? • Join ATLER on web ww. libdemsalter. org. uk • Facebook: www. facebook. com/libdemsalter • Twitter: @libdems. ALTER

40% of wages cost are paid to the government on pay over £ 10, 000

Current Council Tax rates for comparison Scotland CT Average Council Current total Cumulative % Number of Band Value (£) Tax (£) Council Tax (£) of households A 67, 000 766 399, 528, 234 22. 3 522, 778 B 83, 081 894 503, 998, 811 46. 3 564, 249 C 107, 201 1, 021 380, 088, 060 62. 0 370, 717 D 138, 021 1, 149 342, 927, 083 74. 7 298, 354 E 184, 921 1, 404 429, 204, 672 87. 8 305, 985 F 249, 241 1, 660 279, 103, 062 94. 9 168, 273 G 426, 121 1, 915 207, 355, 350 99. 5 107, 931 H 804, 000 2, 298 26, 538, 346 100 11, 449 Totals 2, 568, 743, 618 2, 349, 736