Killer Arguments Against LVT, Not (284)

There's an article on Inside Housing explaining why and how the so-called 'housing shortage' would melt away if we introduced LVT (among many other advantages). A commenter calling himself Chris appears sympathetic to the idea, but...

As meritable as your proposals are all that would result would be the mass sale of landed assets to offshore trusts and the landlords converted to tenants - against which they would no doubt claim tax deductions for the expense and inconvenience of such avoidance in much the same way that they do now over income...

The major appeal you state as easy seizure against non-payment is easily avoided, as I stated already, by converting owhership into a trust and then basing that trust in 'googleland' or a 'starbucks colony' where UK taxation does not apply. Try seizing a foreign asset and you could start a war John B. Whilst the principle, I agree with you, is very attractive, the reality is exactly the same as the peverse taxation we currently have.

Er, shall we leave the topsy turvy world of Homey non-logic and look at what actually happens in actual real life?

In the UK, we have something called "Business Rates" on commercial land and buildings which is so close to LVT as makes no difference. A lot of commercial land and buildings are owned by pension funds, foreign individuals, foreign companies, murky offshore companies and trusts, but collection rates are still close to 100%.

For sure, the rates are collected from the occupant of the premises (whether owner-occupier or tenant) and not the registered freeholder or leaseholder (unless the premises are vacant and not exempted, in which case the registered owner has to pay) and rather unsurprisingly, collection rates are close to 100%, far higher than other major taxes.

Whether, as a matter of administrative simplicity it is better to collect the cash payments from the occupant or the registered owner is a separate issue, the economic incidence is exactly the same. So landlords can pretend to be tenants or vice versa, owner-occupiers can split themselves up into landlord-tenant and vice versa, it makes f--- all difference.

Exactly the same applies to any annually recurring land taxes, such as Council Tax in the UK or previously Domestic Rates in the UK or Grundsteuer in Germany etc; if I buy myself a house abroad, like in the USA, which is liable to ad valorem taxes (and they nearly all are, although the average rate varies enormously from state to state and from county to county), then either I cough up or sooner or later they will repo the house.

There is no requirement for the USA to declare war on the UK, or wherever I happen to live, and it is a complete perversion of logic and language to describe land in the UK as a "foreign asset".

As to "claiming tax deductions for the expense", well, tax deductions are a question of man-made tax law. Business Rates are a perfectly ordinary allowable expense against corporation tax or income tax, which means that for a given tax take, the corporation or income tax rate has to be slightly higher, is all.

I'd be perfectly happy in principle to let households claim a deduction for the LVT they pay against their income tax bills - we could reduce a private household's income tax bill by £1 for every £1 LVT they pay, which neatly sidesteps the "double taxation" KLN - even though that would be adminstratively very messy (what about a shared rented house, who claims it - the landlord or one or more of the tenants?). It's probably easier to net off people's LVT bill and Citizen's Rebate amount to get a single net + or - figure and adjust their PAYE codes up or down accordingly, so that when LVT is increased and income tax is reduced, most people would see a year-on-year modest increase in their net wages.