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.

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?!

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 much of the debate has centred on the "Scottish [income tax] rate resolution", merely devolving greater control over personal tax rates, two potentially far more significant clauses appear just below this. These allow for an Order in Council (secondary legislation, not requiring debate at Westminster) to "specify, as an additional devolved tax, a tax of any description" (our emphasis) and associated "modifications of any enactment, or any other instrument"; and for the "disapplication" (i.e. abolition, in Scotland) of Stamp Duty Land Tax (SDLT).

SDLT is a tax on transactions, not on land values. Although the Bill also enables a Scottish "tax on interests involving land" (i.e. a Scottish SDLT), there is no requirement placed upon Scotland to levy such a tax. Therefore in Scotland, if the Scottish Government wishes to introduce a tax based on the annual rental value of land (Land Value Tax or LVT), unless this Bill is amended it would not require approval of Parliament in London in order to do so.

Scotland's own Parliament faces an election in May. The current minority Scottish Nationalist Government has already shown initiative in piloting Tax Increment Financing (TIF) - perhaps just because it can, i.e. to flex its financial muscles. All but 18 of the 129 MSPs belong to parties with either explicit support for LVT or a strong and growing level of support for it in Scotland. The Greens and Lib Dems are committed, as are several SNP and Labour/Co-op Party MSPs in Scotland.

Although the Scotland Bill may not recieve Royal Assent before the May elections, it provides every reason for supporters of LVT to campaign hard for these newly devolved powers to be exercised thereafter. Unlike the rest of Britain, Scotland has a complete Register of land ownership and does not depend on Whitehall-based officials to conduct land valuations. Given the will of those assuming power in May, LVT could be contributing to Scottish coffers and a resurgent Scottish economy well before the next UK General Election in 2015.

Land reform was one of the first areas for policy action by the devolved Scottish Assembly (as it then was called) in 1998, which helped re-educate Scottish people as to the benefits of LVT, even though it was outwith their legislators' powers until now. Lawyers and valuers based in Scotland among PLRG members should get busy!

At least eight of the member organisations belonging to the Coalition for Economic Justice, of which PLRG is a member, have submitted written evidence to the House of Commons Treasury Committee, which launched an Inquiry into tax in November, prompted by Mirrlees. PLRG itself did not submit evidence, since it has yet to become involved in original research on the matter. However many of our members will be interested to read the submissions. The closing date was Friday 14th January 2011.

Under House of Commons Rules on such Inquiries, the evidence (as submitted) cannot be published other than by Parliament itself, unless special permission is given. However drafts of some of the Memoranda submitted by CEJ members have been circulated and/or placed on their websites.

One organisation - the Lib Dems' ALTER (Action on Land-value Taxation & Economic Reform) has already received permission to let its individual members see their submission (here in draft), which was prepared by economics lecturer Brian Hodgkinson (author of The New Model of the Economy). Extracts of all eight submissions are soon to be made available on each organisation's websites. In addition to ALTER, these are: Labour Land Campaign; Land Value Taxation Campaign; Henry George Foundation; School of Economic Science; Transforming Communities; Systemic Fiscal Reform Group; and CEJ itself.

Most of the authors of the CEJ's submissions hope to be called to give oral evidence to the Committee in coming weeks.

Comments on the paper are welcome, preferably by 14 Jan 2011, to the author.

Jeremy was until earlier this year Partner and Head of Planning at Knight Frank and is now helping Volterra Consulting analyse the impact of taxation on the property industry for RICS. Prior to that, he was Director of Research for ATIS Weatherall - in 2000, he was instrumental in associating that firm with the Progressive Forum, an initiative of the Henry George Foundation at the time PLRG Hon Sec Dr Tony Vickers was Chief Executive of HGF.

Please contact Tony if you plan on coming to this talk.

 Hill summed up the reason at the start of his talk: "Politicians of all parties genuinely want to do 'good' but do not understand the deep structural inequalities that arise from a flawed land market". He went on to quote (among others) JK Galbriath (1992) on "the visible larceny of commercial banks" in the area of lending for speculative property investment, as a major cause of this inequality; the Zacceus Trust (2005) in its "Memo to the PM on Unaffordable Housing" (Blair dismiised it) - and the current Housing Minister, Grant Shapps: "The housing market should be boring and predictable" (if only!)

The talk was rich with research and statistics and Hill has kindly allowed his slides to be made available to all, from the PLRG/Landvaluescape site.

See 2010 11 PRLG Land and Housing Markets sh 241110.ppt

The full Mirrlees Review is published by Oxford University Press and was launched by IFS as a free download on 12 November. The first volume (Chapters 1 to 13) is in its final form: a series of discussion papers, commissioned from various "distinguished authors". The second volume, by the Review's own editorial team, is still only available as "pre-publication draft" chapters. PLRG would like to hear from anyone who has comments, before the final version comes out early in 2011.

Whilst not in any way representing official Government views on tax reform, early indications are that the Coalition will take this "coherent view" extremely seriously. So the findings on land & property taxation are very encouraging for those who favour further 'tax shifting' off enterprise and onto resource rents.

Most significant is the fact that Mirrlees sees LVT mainly as a national tax, not a local one. Whilst calling for it to specifically only replace Business Rates and Stamp Duty Land Tax on non-domestic property (in the summary headline findings on "Business taxes"), the details in Chapter 16 indicate a more comprehensive approach is favoured.

Dr Seraphim Alvanides of Northumbria University approached PLRG Hon Sec Dr Tony Vickers only last month, after a story appeared on Landvaluescape about Newcastle wanting to be a pilot for Land Value Taxation.  Dr Alvanides had been a member of Dr Vickers' "Policy Delphi" during the latter's PhD on Value Mapping. He was interested in following up this work with a practical exercise in Value Mapping a part of Newcastle.

Then last month the Government announced that it was going to allow Councils to use TIF to fund infrastructure projects. Vickers & Alvanides put together a research bid that would help with TIF as well as LVT, because any project relying on land value uplift needs to be able to reassure funders that the revenue will flow back from their investment outlay.

Vickers has now written to the Department for Business Innovation & Skills (BIS), whose White Paper Local Growth included the TIF announcement, to ask BIS to persuade the Valuation Office Agency (VOA) to release property tax data for this research. In the past, researchers have not been given access to VOA data unless it was for a tax-related purpose that was in accord with Government policy, as this project would be.

In what he called "the presentation he'd like [Housing Minister] Grant Shapps to give", Hill's wide-ranging talk was peppered with graphics, quotes and statistics that built up a powerful case for reform of the land market through Value Capture.

"Public debt is not the first-order we face. Private debt is far higher. And property debt is the main problem. If land didn't cost so much, we could do so much more with housing funds."

The conference also heard from Nick Cuff, former planner now turned Chair of Planning Applications Committee on Wandsworth (Conservative run) London Borough. Cuff is one of the youngest councillors in England and co-authored a Bow Group paper on planning reform before this year's elections. Another Bow Group paper was authored in 2006 by Mark Wadsworth - on tax simplification through switching the burden to land. [I must try an 'off the cuff' pun on this....]

Hill will recycle much of the content of his Waterfront talk - for free - to PLRG at London South Bank University on 24th, starting at 6pm. Contact Tony Vickers (07950 202640) if you plan to attend, as accommodation is limited. Enter LSBU via Borough Rd (door 1 on map)

This comes days after a Liberal Democrat conference in Oxford, of the South Central English Region, called unanimously for Lib Dem Ministers to campaign harder in government for LVT.

A few days later comes a letter in the Independent, from a Conservative councillor in Hampshire (John Kennett), calling for the same policy.

We already have nearly 30 Labour MPs, who fought the election earlier this year with support from the Cooperative Party (whose manifesto - page 17 - prominently included LVT), signed up nominally to what increasingly looks like an idea whose time has come.

Campaigners for LVT are due to meet with the Co-op group of MPs shortly in Parliament, to discuss how to take forward an All Party Parliamentary Group to develop the thinking which, at present, seems most advanced among the Greens in Scotland.

Earthrights' co-founder Alanna Hartzok has just contacted PLRG to inform us on project progress in a number of countries, using the SWOT methodology to analyse a country's current status as regards capture of land values for securing land rights and combating poverty.

Among the components of what the UN-HABITAT regards as good practice for land policies are:-

"Consider fiscal and other measures, as appropriate, to promote the efficient functioning of the market for vacant land, ensuring the supply of housing and land for shelter development; Develop and implement land information systems and practices for managing land, including land value assessment, and seek to ensure that such information is readily available; Make full use of existing infrastructure in urban areas, encouraging optimal density of the occupation of available serviced land in accordance with its carrying capacity; Consider the adoption of innovative instruments that capture gains in land value and recover public investments".

In the UK today, almost the only people (outside the top decile of income earners) able to enter the domestic property market are those with family already in it, via "the bank of mum and dad". Therefore it is timely that RICS is taking a long hard look at how tax impacts on the entire property cycle. Our Coalition Government is 'market friendly' and should be receptive to ideas that make the housing and land markets work better.