1. While the 'failed old parties' bandy about fairly similar manifestos, let's remind ourselves of the biggest immediate problem facing today's younger 'hard working families'.
They aren't just looking at the additional future publicly collected tax bill required to pay off the accumulated national debt which the current lot has run up, they also have to borrow and pay off an average of £160,000 or so to 'jump on the housing ladder', of which around half is a privately collected tax, in other words, the price of an average house in excess of the bricks and mortar value.
2. Having ploughed through Fred's new book on the way home, the most telling part is this (page 266):
Was I being paranoid?
One man knew the answer to that question: Matthew Taylor [New Labour's policy director for the 1997 General election, also charged with drawing up the manifesto for the 2005 General Election]. And, as it happens, he too was a speaker at the Warwick Economics Summit. We met in the hospitality room, and I told him about my 1997 alert to Blair, Brown, Darling, Mandelson and Campbell. Ten years, enough time for a government to prevent a house price boom that would otherwise peak in 2007, driving the economy into recession.
Taylor knew the inside of New Labour's policy-making process like no-one else. So I challenged him with a question: "What was the one policy that the government could not countenance?"
He replied without hesitation: "The Land Tax".
3. I have, on this blog and elsewhere, allowed myself to be bogged down into the finer points of land valuation, which is a secondary issue. With my simplification campaigner's hat on, here's what a Land Tax boils down to:
a) all the taxes on property occupation and ownership and wealth generally*, which could and should be replaced, amount to about £60 billion per annum.
b) There are about 4 million acres of privately-owned, developed land in the UK
So to replace the entire list below would require a tax of about £15,000 per acre or £3 per square yard per annum. So the Land Tax bill for an 'average' semi in an 'average' area would be £1,000 a year or something (slightly less than the current Council Tax bill plus TV licence fee).
If the tax is to be more proportional to actual land or property values, then round my way** it would be more like £10 per square yard per annum, and in town centres it would be much more - as much as £100 or £200 per square yard per annum in prime Central London*** (which is no more than what they currently pay in Business Rates). Conversely, the tax would only be £1 or £2 per square yard per annum for ex-council houses or industrial estates outside the South East (which is slightly less, on average, than they currently pay in Council Tax less Council Tax Benefit plus TV licence fee; or in Business Rates as the case may be).
Where we take it from there is another topic.
* From the Public Sector Finances Databank for 2009-10:
Council Tax £24.8 billion
Business rates £23.7 billion
Stamp duties £7.4 billion
Capital gains tax £2.5 billion
Inheritance tax £2.2 billion
Insurance Premium tax £2.3 billion
Then minus off Council Tax Benefit and agricultural land subsidies (about £3 billion each) and add on the TV licence fee (also about £3 billion).
** Where I live is probably in the highest quintile of areas by property value. If I multiply the area of my house by £10 per square yard, then that amounts to rather less than a quarter of the rent we pay every year, or about half of what our landlord currently has to pay in income tax on the rent, plus the Council Tax and TV licence fee we pay. So this all seems 'about right'.
*** So somebody living in a flat in Central London in a ten-storey block with no private garden or car park can divide the size of his flat by ten to work out his share of the Land Tax.
Monday, 12 April 2010
What's everybody so scared of?
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6 comments:
Hmm....
My house, not large, sits on a one acre plot. It's in a conservation area that's part of a World Heritage Site, so no additional development is allowed and anyway, apart from the bit the house is built on, most of the rest of the ground is too unstable for further building, so there's no way I could sell off chunks of it in order to reduce the annual bill from your averaged £14,520 - which I can assure you is a f*ck site more than all the taxes that you've agregated for replacement.
All in all, LVT is fine if you live in a flat or on a housing estate, but somewhat draconian if you live "in the sticks".
P, I have no idea what your house/land is worth - perhaps you'd fall into the £1 or £2 bands? More to the point, if you were to sell up, would a purchaser be willing to pay 4,840 x £x? Inevitably he would - the tax would always only be a small fraction of the mortgage interest.
If Pogo is prevented from developing the bulk of his land, because of some planning constraint, then that land isn't worth very much - but now we're tangled in the thorns of land valuation again, as the fact that Pogo's neighbours are prevented by those same planning regulations from erecting blocks of flats in their gardens certainly increases the value of Pogo's land.
(And, of course, were Pogo's house to be sitting in splendid isolation on an acre of useful, valuable land, part of the point of LVT is that he would pay a f*ck site more tax...)
Mark: Surely land tax for a block of flats would be owed by the freeholder?
Anon, exactly. I can't add much to that. Plus we know absolutely nothing about where Pogo's house and land is (but he does).
In an ideal world, LVT would be paid by the freeholder on the entire value. But then there would have to be an addendum to the LVT Act saying that he is allowed to divvy it up pro rata between the capital value of each flat and the capital value of the freehold itself.
If the freeholder tries to get his tax down by valuing his own freehold too low, then of course the tenants would have the right to enfranchise under Leasehold Reform Act 1993 at the lower value. That's that problem sorted.
In an ideal world, LVT would be paid by the freeholder on the entire value. But then there would have to be an addendum to the LVT Act saying that he is allowed to divvy it up pro rata between the capital value of each flat and the capital value of the freehold itself.
I don't see the need for any specific addendum on divvying up the tax. Assuming this is a true LVT (and not a PVT like in N.Ireland), then I think the freeholder should pay all the tax, and would be the only entity known to the LVT tax office (In fact one of the advantages of a LVT is to reduce the number of entities the tax office must deal with).
The freeholder can of course try to pass on the cost of this tax to leaseholders/tenants via ground rent/rent, subject to market conditions.
Ed, I'm not worried about flats that are rented out six or twelve months at a time, the market will sort that out, I mean specifically long-leasehold flats where the leasehold has a capital value in its own right.
The leaseholders are pretty much at the mercy of the freeholder vis a vis service charges and so on, so their has to be a sensible way of apportioning it - as ever, the 'you cut, I choose' principle will sort that out.
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