Crown Estates - commercial landlord or tax collector?

The UK government and all its branches - local councils, Ministry of Defence, Crown Estates and so on own a heck of a lot of land and buildings in the UK. When they are letting out surplus properties they act, by and large, like any other landlord, i.e. they charge the highest rent that they can get, which, under Ricardo's Law Of Rent, equates to all the 'super profits' that a business can generate over and above normal wages and return on capital by trading from that particular location.

I also have plenty of clients who are tenants in an office block or similar owned by one branch or other of the government, such as Crown Estates, and to them, Crown Estate is a commercial landlord like any other.

As we know, taxes on turnover, employment and profits are Bad Taxes, as they discourage economic activity. As a thought experiment, let's imagine that the government decided that all businesses who rent their premises from the State (or people who pay market value to live in housing owned by The State, i.e. not necessarily council tenants with subsidised rents) were exempt from VAT, PAYE, income tax, corporation tax and so on. The government could even take a larger area (Ministry of Defence land) and declare it to be a tax-free zone. This increases the super-profits that a business can generate (or an employee's take-home pay) so what happens to rents? They would go up of course, as a business would be happy to pay the original rent plus the bulk of the taxes it can save by relocating to tax-free premises.

Next question, if a business trading in the UK currently pays rents of £10,000 and pays taxes of £10,000 per month, how much would it be prepared to pay to trade from tax-free premises? The answer must be 'nearly £20,000'. We can look at this in another way, by comparing the variations in pre- and post-housing cost incomes across the UK. The newest article I can find is from 2003 (although there have been many more since), which concludes that higher net incomes (post tax) merely push up rents and house prices, so although there is quite a disparity in headline wages between London/South East and North East/North West England, once you take into account housing costs, there is little difference in disposable incomes, again, entirely as predicted by Ricardo. Or we can look at rents for flats in Monaco, which are astronomical of course, because all the Formula One drivers and so on are happy to pay £100,000 a month for a small flat to establish tax residence if that saves them £100,000 a month in taxes that they would have to pay if they lived elsewhere.

OK, so let's imagine you hear about these tax-free zones and decide to relocate there with business and family and take the higher rents on the chin - would you consider the money you pay to be 'rents' (because you are paying freely negotiated market value for exclusive possession to certain land and buildings) or would you consider it to be 'tax' because it is going to the government, which uses the proceeds to pay for core services that add value to the location (be it transport infrastructure, policing, street lighting, refuse collection, whatever) and spends the rest as it pleases (which any landlord is entitled to do)?

Taking the thought process to its ultimate conclusion, what would happen if by some miracle we had a completely 'libertarian' government that scrapped all the unnecessary interference in our lives (hooray!); scrapped the Welfare State, NHS, state education (sort of half-a-cheer); scrapped most taxes (hooray!); shunned Land Value Tax as 'communist' (boo!) and just funded itself with a few sneaky stealth taxes (like VAT, import duties and so on), i.e. turned back the clock a century or so?

Would tenants (businesses or households) actually end up much better off (in £-s-d)? Probably not, because every £1 of extra net income they now get (because income tax is scrapped) would be largely soaked up by higher rents. Existing landowners would make a one-off windfall gain equivalent to the NPV of future growth in the economy, of course. However hard future generations worked, all their extra income would be soaked up by higher rents and property prices.

Sure, it might be far more pleasant being exploited by landowners and landlords (at least there is an upper limit to what they can charge) than by an authoritarian government, but the difference is not as big as you might first think.

Just sayin', is all.