February 2011 Archives

Details wiill follow but PLRG is very pleased to report that Stuart Adam, co-author of the Chapter in IFS' Mirrlees Review Volume 2 "Tax by Design" - Chapter 16 "The Taxation of Land & Property" - will be speaking about the Review Team's work in this area on Tuesday 29th March 6pm. Entry is free at our usual venue: London South Bank University.

We reported briefly three months ago on this, when Volume 2 was published in draft (Volume 1 is already published 'properly' online). The final version of Volume 2 is to be published very shortly.

The Mirrlees Review triggered an Inquiry by the House of Commons Treasury Select Committee in to the fundamentals of tax policy, which has received some 36 written memoranda, of which at least 8 were largely about Land Value Taxation. No oral evidence was taken from the authors of these submissions and it remains to be seen what the MPs make of Mirrlees' conclusions in this (or any) area.

Property Taxation - Time for Reform 03.02.2011.ppt - slides of a talk by Jeremy Edge to PLRG on 3rd Feb 2011.

Since the RICS launched their major study last summer, it is clear that the scope of what they are likely to recommend to Government by way of tax reform has narrowed. Whilst there are fundamental, long-term issues with the current tax structure - Jeremy was highly critical of how the industry is hit by taxes at every stage of the property cycle - the proposals emerging will be limited to a few reforms that RICS' consultants believe have best chance of being accepted by those in power.

Jeremy said that "there is a very clear opportunity to reform Stamp Duty Land Tax" and some chance that Government will review its decision to drop 'tariff-style' developers' contributions. He believes that Treasury are keen to find way od simplifying the way that tax operates and also of looking at ways of capturing land value uplift - but without a complete reform of the current Council Tax and Business Rates systems, if possible.

In the discussion that followed, there was general agreement that there is little scope for making the current tax system have a more benigh impact on construction without wholesale reform - and that a site-value based system would achieve much greater simplification as well as economic efficiency.

PLRG's Chairman, Dave Wetzel, has been advising certain parties across the Irish Sea about property tax. Currently there is no form of 'rating' (local property tax) in Eire, although in Northern Ireland the old rating system was never abolished when Britain had Poll Tax imposed in 1989. Some would say that lack of any property tax helped fuel the house price bubble, whose bursting was a major cause of Eire's current economic woes.

The outgoing Fianna Fail / Green coalition government had plans to introduce a Site Value Tax. Those plans may still be implemented, if the piece in yesterday's [Irish] Sunday Business Post online is right....

Fine Gael's plan to replace a property tax by introducing capital gains tax on primary residences has the political merit of not imposing a new charge on people immediately.

It is also a less clumsy and probably fairer way of raising revenues from property. But, like stamp duty, it depends on transactions. As such, it is highly unpredictable in terms of the revenue it might raise, especially in a depressed housing market, such as at present. Labour suggests a ''site value tax'' would be introduced in 2014, but no property tax immediately.

The difference between an annual tax, such as Greens & Labour in Eire propose, and a property tax that only gets collected when a property is sold, is that the former encourages construction and also transactions in property - and cannot be avoided by simply not selling or developing a site - whereas if there is no transaction then there's no tax!

Why is that so difficult for some people to understand?!

This just came to the attention of Landvaluescape. It is taken from an article in the South China Morning Post last July. Coming from someone who worked inside Hong Kong's property cartel, it confirms what many told me was wrong with Hong Kong's "free" market in land when I worked there myself in the early '90s (writes Tony Vickers).
 
Alice Poon Wai-han had sold fewer than 600 copies of her book on the Hong Kong property market and its domination by a few powerful developers, until a group of young activists persuaded her to translate it into Chinese.
 
Now the book, Land and the Ruling Class in Hong Kong - which criticises past and present governments for favouring major developers with high-land-price policies - has become the surprise hit of the Hong Kong book fair.
Almost 4,000 copies have been sold in the three weeks since the Chinese title was launched in late June, and Enrich Publishing is ready to put a third edition on the market.
 
Poon, who initially aimed the book at policymakers, knows her topic as she worked on planning and acquisition for major developers for decades before retiring in 2003.
 
Although "Land Premium" (a kind of huge Developers' Contribution that contributes around 40% of Government revenue in HK) makes the rest of the economy less burdened with taxes than anywhere else, it is far from perfect. Hopefully Chinese policy-makers will adopt what many have tried and failed to do in Hong Kong: an annual land-value tax. One effect would be to prevent the establishment of cartels, because the up-front sums for developers would be far smaller.
We have been asked by Dr Seraphim Alvanides to advertise this lecturer post at Northumbria University, likely to be attractive to anyone interested in land value capture theory and practice. Note closing date for applications is 14th February.

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