March 2011 Archives

Prior to the Irish General Election, the opposition Fine Gael - the main party in the new Coalition - was promising to ditch their Fianna Fail / Green Government predecessors' policy of a Site Value Tax (SVT). However the Labour Party, always Fine Gael's most likely partners to replace the unpopular regime that oversaw Ireland's massive boom-bust property cycle, said it would retain SVT.

Once again, the tail wags the dog - the incoming Irish Government has kept SVT in its Programme. This is a victory for Ireland's very effective 'green economics' research foundation (leading the way for the British 'Coalition for Economic Justice' (CEJ)): Feasta. In 2008, Feasta obtained official status from the previous Irish Government, specifically to research what is called over there "Smart Taxes" - a project involving an international network of academics and campaign groups.

Is this the role model for PLRG? Should we 're-brand' and/or join the Smart Tax Network?

Irish author Kevin Cahill, writing in New Statesman earlier this month, would almost certainly not support SVT.  According to Cahill (in conversation with myself many years ago) the secrets of Ireland's economic boom was the absence of any property tax on homes. In his view of the world's need for 'Land Reform', he still regards support for SVT/LVT as "tax addicts" - on the wrong side of good sense. The solution to the Great Property Swindle, apparently, is Land Registration. Let the people know who owns the world - even Antarctica (mainly Her Majesty Queen Elizabeth II, would you believe!) and somehow magically all land and inequality problems will solve themselves.

Somehow I think Feasta is right and not Cahill.

The House of Commons Treasury Committee published their report of an Inquiry into the Fundamentals of Tax Policy last week. The Inquiry appeared to have been largely triggered by the IFS' Mirrlees Review last November, although the Committee report says it was more to do with the Government's earlier announcement on "a new approach to tax policy making" - an approach which totally ignores the potential to use tax as an economic instrument.

You can view a summary of what Mirrlees' lead author says about land taxes in slides by Stuart Adam, on IFS' website. Even better, if you can come to PLRG's next meeting on Tuesday 29th March at LSBU (6pm) you will get a chance to hear Stuart Adam discuss his views - its free too!

Treasury Committee were able to dismiss LVT out of hand with a quote on page 6 from a 2001 OECD paper:-

"While such a tax system would avoid distortions in economic behaviour, it would be highly unlikely to yield sufficient revenues to fund socially useful expenditure without producing substantial inequity."

 I found this paper here. It is No.6 in the series of Tax Policy Studies. In it, there is no attempt whatsoever to substantiate that statement! So much for a "study".

In a 2010 OECD paper on tax policy however - No.20 in the above list, or here - it says:-

"A growth-oriented tax reform would therefore shift part of the tax burden from income to consumption and/or residential property."
How could that happen without "sufficient revenues" from property?!
Ironically, the day before Treasury Committee published their report (which seems to have sunk without trace in the media), a piece in the FT reported that Hong Kong's Government, which relies on Land Rents accounting for about 40% of all its revenue, was giving US$770 to every citizen - because it has a surplus. How "equitable" is that?! The FT article, by David Pilling, is not supportive of this giveaway but many of the comments posted afterwards explain why this might be an extremely good idea. After all, any reputable economic theorist will tell you that 'economic rent' goes unearned to landowners if government does not collect it. Yet it is the actions of the whole community that create that value, so why not give it back to everyone?

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