Presentation on theme: "How Lo-Tax (LVT)could be gradually adopted Presentation by William Davison Chair of ALTER."— Presentation transcript:
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 3x 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 28m+ 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 LoTax 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 LoTax 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 LoTax 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 rateYear 1Year 2Year 3Year 4Year 5 % of property CT Band 1.00%2.00%2.50%3.00%3.50% 22% A £ 766 23% B £ 894 23% C £ 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 cut0%1% 2%3% Basic rate20%19% 18%17% Higher rate40%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 1and 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
LoTax 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 LoTax 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 LoTax
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40% of wages cost are paid to the government on pay over £10,000
Current Council Tax rates for comparison Scotland CTAverageCouncilCurrent totalCumulative %Number of BandValue (£)Tax (£)Council Tax (£)of households A67,000766399,528,23422.3522,778 B83,081894503,998,81146.3564,249 C107,2011,021380,088,06062.0370,717 D138,0211,149342,927,08374.7298,354 E184,9211,404429,204,67287.8305,985 F249,2411,660279,103,06294.9168,273 G426,1211,915207,355,35099.5107,931 H804,0002,29826,538,34610011,449 Totals 2,568,743,618 2,349,736