Friday, November 22, 2024

The radical land tax proposal that has garnered support from both the Right and the Left

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In Westminster, one of the richest boroughs in the country, the annual council tax bill for a typical home this year is £973. By contrast, in Hartlepool, a heavily deprived part of the country, homeowners in the equivalent tax band are charged £2,278.

“Imagine if Labour were to serve two terms – that 10 years of government would take us to 2034,” says George Dibb, associate director of economic policy at the Institute for Public Policy Research (IPPR).

“We’d be looking at using property valuations that were more than 40 years old for council tax. That just seems utterly unfeasible to me.”

Then there are business rates, a land-based tax for businesses that critics say is out of date and doesn’t reflect the rise of online shopping nor the declining value of high street premises.

Supporters of reform put forward several possible solutions.

Stuart Adam, senior economist at the Institute for Fiscal Studies and an author of the 2011 Mirrlees Review of the tax system, argues that the best route would be taxing the value of both land and buildings for residential property, while only taxing land for business properties.

Goodhart argues tax should only be imposed on the value of land, not the buildings on it, so as not to discourage construction.

Fairer Share argues that some tax needs to be imposed on buildings otherwise local authorities with very low land values would receive too little council tax.

It proposes scrapping council tax and stamp duty and replacing both with a flat 0.48pc rate across the whole value of a home.

Winners and losers

There would be winners and losers. Analysis for Fairer Share found its proposals would mean a tax cut for 77pc of the country and a rise for 23pc.

Residents in the City of London, Westminster and Wimbledon would see the largest proportions of homeowners losing out.

A typical homeowner in north Cornwall would save on average £700 per year while a typical homeowner in Kensington would see their tax bill go up by £1,100.

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