Bath Institute for Policy Research (IPR)

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Presentation transcript:

Bath Institute for Policy Research (IPR) Land Value Tax in London Catherine Barnaby C.Barnaby@bath.ac.uk Bath IMI Bath Institute for Policy Research (IPR)

Catherine Barnaby, Bath IMI. Overview of talk Current property taxes; Land value tax – what it is; Land value tax – how to estimate it; Comparisons of LVT with current taxes. Catherine Barnaby, Bath IMI.

Types of Property Tax (London) Council Tax(CT): Private dwellings, based on property value (banded). Paid every year; Stamp Duty Land Tax (SDLT): Based on sale value with marginal banding. Paid when property changes ownership. London 2015. Domestic SDLT=£3.0bn, Non-Domestic SDLT=£1.3bn; National Non-Domestic Rates (NNDR): Business properties. Property is given rateable value; rate payable is set centrally. Other tax revenues - small in comparison. (Annual tax on enveloped dwellings) Catherine Barnaby, Bath IMI.

Land Value Tax, LVT (Denmark, New York…) Land (not property) is given a value. Tax payable is percentage of land value. Why??? Reasons include: Recovers value from society providing amenities, infrastructure (Crossrail, Roads, HS2) etc; Encourages maximal use of land; Lots of political studies, think-tank work, social commentaries… But no numbers to go with them. What level would need to be set in the UK? Will it give the expected re-distribution of tax burden? Can be based on rental value (called Land Rental Value Tax). Catherine Barnaby, Bath IMI.

Estimating Land Value Tax (1) Need a value for the land. Could use property value – rebuild cost Mirrors an implementation. No real data in UK; time-consuming. Estate Agents? Land registry? Builders? What is “similar”? Insurance Companies? Builders? Catherine Barnaby, Bath IMI.

Estimating Land Value Tax (2) Or at a Borough level, use: Typical land value per hectare; Number of hectares occupied by property. Lots of drawbacks: accuracy, timeliness…. But… sufficient for a first-estimate. House of Commons Library Generalised Land-use Database (GLUD) Catherine Barnaby, Bath IMI.

Estimating Land Value Tax (3) Comparing to other taxes. Keep total revenue constant. Sets LVT percentage; Calculate revenues; Compare by Borough. Dwellings – area of buildings, or building+garden? Domestic LVT rate = Non-domestic LVT rate? Plots: Order Boroughs by percentage increase in revenue. Catherine Barnaby, Bath IMI.

Results(1). Domestic LVT at 1.04%, CT Catherine Barnaby, Bath IMI.

Results(2). Domestic LVT at 1.97%, CT+SD Catherine Barnaby, Bath IMI.

Results(3). Non-Domestic LVT at 2.85%, NNDR Catherine Barnaby, Bath IMI.

Catherine Barnaby, Bath IMI. Summary First UK qualitative work on LVT; Lots of caveats, but does what’s needed; Base for lots of other work: within-Borough variation, Borough-boundaries, value of being close to…; Shows Boroughs which win or lose compared to current taxes. Simple and effective methodology; Easily extends across UK; Informed policy decisions Catherine Barnaby, Bath IMI.

Thank-You Questions? Catherine Barnaby, Bath IMI, C.Barnaby@bath.ac.uk