Scotland pressed on land value tax

The Scottish government should consider introducing a land value tax (LVT) as a way of delivering on its land reform objectives and raising revenue in a more progressive way, an academic report has suggested

Written for the Scottish Land Commission by a research team at the University of Reading, the study argues that there is scope for reform of existing land and property taxation. It points out that with a total estimated value of around £5 trillion, or just over half of the total net worth of the UK, land is the most valuable asset in the UK.

The researchers suggest that an LVT would be an efficient approach to taxation, as the supply of land is relatively fixed and cannot fluctuate with changes in rates.

However, the report identifies a number of practical issues that would need to be resolved before any LVT system is implemented. These include the role of the planning system and the land register, and coordination with existing land and property taxes so that any new tax would not negatively affect development viability and wider public policy goals.

Alongside the report, the Scottish Land Commission has also published briefing paper which argues that an LVT would reduce the amount of vacant and derelict land by establishing a financial cost for keeping land idle, creating an incentive for it being brought back into use and discouraging speculation in the land market.

It would also capture more of the publicly-created increases in land value as a result of wider societal changes: for example, improvements in the local or national economy can make an area more desirable to live in increasing land value; LVT has the potential to return some of these gains to society by using the revenue raised to help fund local infrastructure, amenities, and public services.

Hamish Trench, chief executive of Scottish Land Commission said: ‘This report provides a good evidence base for us to engage widely on the potential role land value taxation could play in making more of Scotland’s land.

‘The research suggests land value tax could contribute to addressing key land reform objectives, including bringing vacant and derelict sites into use, reinvesting rising land values to public benefit and moving to a more diverse and productive pattern of land ownership.

‘The Scottish Land Commission will now be engaging widely with stakeholders to undertake further analysis of role land value tax could play in delivering land reform priorities.’

However, the report’s authors sounded a note of caution, concluding that ‘there is ample opportunity to reform Scotland’s existing system of land property tax in order to introduce a more progressive and equitable system which has the potential to deliver land reform objectives. However, the key would be to work proactively to secure the necessary political and popular support.’

Investigation of Potential Land Value Tax Policy Options for Scotland is here

Report by Pat Sweet

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