Tuesday, 16 January 2018

Killer Arguments Against LVT, Not (432)

From Farmers' Weekly:

The Scottish Land Commission has been instructed by the government to investigate the tax as part of a wider piece of research on land reform issues.

The taxation would raise public revenue through an annual charge based on the rental value of land, typically levied against the unimproved value of that land, not taking into account any buildings, services or infrastructure.

So far so good, here's the classic one-liner:

Shadow rural economy secretary Peter Chapman said the prospect of such a level could be “catastrophic” for farm incomes.

Woah! His argument is totally devoid of facts - without knowing the proposed tax rate (anything between 1% and 100%) it is impossible to say what the impact will be. It could be anything between "very modest claw back of agricultural subsidies" (which average out at £40 per acre per year in Scotland, as far as I can make out) all the way up to "quite a lot".

Then we get into logic free arguments:

Andrew Wood, partner with property consultant Bidwells, said this plan would increase food production costs and put Scotland at a further disadvantage for doing business and securing investment.

Whether it increases total food production costs or not depends on whether the Scottish government reduces other devolved taxes (income tax, business rates, LBTT and Council Tax). Because of the tendency of LVT to stimulate output per unit of land, per-unit production costs will probably fall, or worst case, stay the same.

LVT has little impact on "doing business", in fact it probably helps people wanting to "do business" because it strengthens their hand against land owners who want to hold them to ransom charge them rent, and after all, it's "business" which invests, land is just there to be used.


DBC Reed said...

According to Dave Wetzel, the Scottish land Commission is inviting tenders from people to submit research about the different ways Lvt is put into practice. Could be an earner for someone in the field.

Mark Wadsworth said...

DBC, I know, I saw that email.

It is a waste of time, there have been endless studies of impact of LVT (in the UK or anywhere else) already we know the answer to that bit. But I bet that the study won't be allowed to include a summary of the damaging aspects of VAT or NIC.

Physiocrat said...

Rent is not a cost of production but a surplus over the production at marginal locations. LVT is rent collected as government revenue.

Most of the land value in Scotland is in the middle of Edinburgh and Glasgow.

Elsewhere the rental value is a tiny amount per acre, though it must add up where holdings are huge.

Mark Wadsworth said...

Ph, Edinburgh and Aberdeen, not Edinburgh and Glasgow.

Total rental value of Scottish farmland is 2 - 3% of the total.

It's a bit higher as a percentage than for the UK as a whole because farming is a larger % of Scottish total area and a larger % of Scottish GDP and employment.