Finally completing the Land Register would answer the question of “who owns Scotland?” and dramatically increase transparency.
The Scottish Greens see Land Value Tax as one part of a range of measures that would transform our current econmic system into one that works for people, communities and the planet.
Land Owners Do Nothing to Exponentially Increase Wealth
According to the Office for National Statistics, land values have increased by more than 450% since 1995.
This has led many people to question how the benefits from increasing land values are distributed – and whether more needs to be done to ensure that the gains from rising land values benefit society as a whole.
At the same time, a well-designed land and property tax can help to moderate land and house prices, increase housing affordability, bring unproductive land back into use, and reduce wealth inequality. The Scottish Green Party believes that land value taxation is the best long-term policy for local taxation.
How Land Value Tax Works
Land value tax raises revenue through an annual charge based on the value of a given parcel of land. Unlike other types of property tax, land value taxes are based on the unimproved value of land, ignoring any property or infrastructure that might be on it.
The value of land is derived from its scarcity – they don’t make any more of it! – and its location. Sites with good transport links, located close to schools, shops and other amenities tend to be more valuable than sites without such advantages. As these locational advantages are generally created by society rather than the effort or investment of the landowner, we believe that the increase in value they generate should be used to benefit society as a whole rather than be retained by the landowner.
Similarly, the granting of planning permission can increase land value substantially, in some cases more than a 100-fold. But that again is a value created by society, and not reflective of investment by the landowner. Taxing land value is one way of enabling such increases to be returned to society.
A Curb on Land Banking
The other key benefit land value tax delivers is a curb on speculation and land banking, and instead encourages productive use. Speculation is only profitable if land values continue to rise, and the speculator can pocket a profit when land is sold – the speculator makes no money from investing in productive activities, and currently there are no disincentives holding land for as long as it takes to achieve a profit.
The problem is amplified in an economic downturn – which is particularly relevant to our current Coivd-19 situation – when speculators would potentially make a loss on land sales, they are incentivised to continue to hold land and wait, potentially for years, for land values to rise. In the meantime these sites sit empty, and blight our town centres and communities.
By applying an annual charge to owning land, land value tax creates a cost to speculation and non-productive land uses, which incentivises a move towards investment and productive use on the part of the landowner – or sale to someone who will.
How Do We Implement LVT?
There are some prerequisites before a land value tax could become operational – although these also bring their own benefits.
- Complete and up-to-date Land Register
- A reformed planning system
- A robust land zoning system
Land value tax requires up to date information on all land ownership, land use and land prices but this is not yet currently available in Scotland. Finally completing the Land Register would answer the question of “who owns Scotland?” and dramatically increase transparency.
To implement an effective land value tax the planning system would need to be significantly reformed, moving away from the current laissez-faire developer-led discretionary system, to a robust European style zoning system. This in its own right would also help to cut speculation, and give communities greater clarity on what local development could look like.
Land Value Tax is a System that Benefits Wider Society
We therefore favour a system of land value taxation since this is a system that brings wider benefits, captures the value created by society in land values, incentivises productive land use, penalises land speculation and encourages the improvement and upgrading of property.