Originally posted in the comments here:
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OK, we are hot shot property developers and a vacant site comes up for auction at the edge of town where we can build a shopping centre or something.
The vendor is a pension fund. The pension fund manager doesn't have much of a clue about local land values so he just goes to a local estate agent who touts it round and offers a thirty year lease. The pension fund manager lets us know that he is best mates with people in the council, so we will get just about any planning permission we apply for and that the land is in a special Enterprise Zone so will be exempt from Business Rates for thirty years.
When the leasehold expires, the pension fund will buy the building for an agreed % of its original construction cost as agreed between the parties (like they do in Switzerland).
As a special favour, the estate agent puts us in touch with an investment fund manager who is prepared to lend us cheap money, a hundred per cent of the land price, 5% fixed for thirty years.
As aspiring capitalists, we do our sums (estimates of annual rents we can collect minus running costs and amortisation of bricks and mortar) and put in the winning bid of £10 million for the land (we have to pay our minimal search costs ourselves, as did all the other bidders - it is the searcher who pays for this, not the landowner, you do your searching before you buy the land) and we have to repay £650k a year for the amortising loan, at the end we get our construction costs back, ignore those.
So we all meet up to sign the paperwork, the Town Mayor turns up with a photographer from the local newspaper, the investment fund guy hands us a £10 million cheque (the loan) which we hand over to the pension fund guy (the purchase price), champagne corks are popped, secretaries' bottoms are patted and we all feel very pleased with ourselves..................
Alcohol flows and tongues are loosened and the pension fund and investment fund managers come over and tell us that we have been scammed.
They both work for the council, there was no pension and no investment fund. The land belonged to the local council in the first place and the money they "lent" us never existed, it was magicked into creation when we signed the purchase agreement - they return us the shredded cheque as proof.
What is "real" is the fact that we have to get on with building and maintaining the shopping centre and getting retailers and customers in (as planned) and that we have to pay £650k a year in quasi-LVT to the local council each year for the next thirty years.
- How is that any different to buying the land from a private purchaser and borrowing the money from a private bank?
- Why would it be any different if the land "belonged" to somebody not using it and the council pays a developer to work out how much he would be prepared to pay and for what type of planning, and then grants planning for whatever use is best and slaps it with the corresponding LVT or Business Rates?
- Why is it in any different if the owner of a nearby existing shopping centre already has an annual BR bill of £650k?
In all cases, the same value is released or created, the same activities take place, builders get work, retailers get premises, local people get job and shopping opportunities.
So where is the difference?
Two Birds, One Stone!
1 hour ago
13 comments:
As usual I am going to have to read through that several times. Then I'll be able to precis it and repeat it. As to comments? No, not really.
"So where is the difference?"
Very simple - if the third party owner is not wishing to sell his land, and doesn't wish to become a shopping mall developer, then he is forced to sell his land against his will, because he has no way of paying the LVT on a shopping mall. Thereby proving he has no real rights of ownership at all. Which is the entire point of LVT of course, to remove the rights of land owners and turn them into tenants of the State.
Not at all, Mr Sobers. We are all freehold tenants of Her Majesty already.
But setting that aside, the third-party owner may well find his LVT greatly increased but the chances are good that his other taxes will have been reduced by at least as much. Hence his overall after-tax income won't change that much. So if he could afford to keep the land before LVT, he will be able to afford to keep it afterwards.
Of course he would likely become much better off if he did sell but that remains his personal decision. He will not find himself forced to sell.
S, what nonsense you talk!
If somebody is mad keen to own a bit of land and do nothing with it, then there is plenty of cheap land he can buy with which to do nothing.
He doesn't need to own this particular bit near the edge of town, does he?
He can sell this bit and buy himself some farmland and hold that out of use instead.
Your argument is about as thin as saying "I'm not allowed to park my car on double yellow lines in Downing Street and if I do it will be towed away. So that means I have no real rights of ownership at all".
There is a place for land not being used (the countryside) and there is a place for land being used (urban areas), end of.
I'm not sure what you think gives you the right to tell other people what they should do with their land (and tax them on the basis of what you have decided they should do with it) but its certainly not anything that incorporates the Human Rights of the individual to own and hold land without interference. You may not see why someone might want to continue growing cabbages on land that could be a shopping mall, but that right is inherent in the concept of private property. If you can impose your views on theirs, then you are the true owner of the land not them. Its as simple as that.
S, you are the one you argued that land is not a monopoly, that all land is equal and that profits made by a landowner are down to his efforts, not the efforts of society.
Therefore, if the council gives you some other land (or money to buy other land) somewhere else on which to grow cabbages in exchange for your current land on which you wish to do nothing but grow cabbages, then what have you lost?
In the alternative, you agree that land is a monopoly, that all land is far from equal, that the gains land owners make are down to the efforts of society, in which case the benefits a landowner receives/the burdens he places on society by holding it out of use are a reasonably base for taxation.
It's one or the other, Mr S, make up your mind what you are going to argue.
I believe that would be the "it´s moi land" argument, to which no counter-argument can be made to match.
Kj, it's a non-argument.
My car is my car, I have paid for it. But the petrol and insurance and repairs I consume each year have to be paid for afresh - that was not included in the price and it is not within the second hand car dealer's power to promise me free petrol and insurance and repairs for all infinity.
And if I crash my car, which burdens society I get fined or punished. Fair enough.
Likewise with land - yes of course that is S's land, but that is no reason for him not to pay for society for the benefits he receives or the burdens he imposes each and every year.
Further, he can look in the small print all he likes, when he bought his land all he acquired was the entirety of the vendor's interest. Nowhere did that vendor guarantee that the land's value would always increase or that a future government would never impose a tax on it.
End of.
Kj, the other counter-argument is, "It's moi earned income and I don't see why I should pay tax on that".
MW: I´m just rehashing. The faux-lib will ignore the nature of land as a non-produced, non-capital-good, and claim the essence of land is the importance of the owner being able to grow cabbages and forfeit the alternative income of doing so. I happen to agree that anyone should choose to grow cabbages if they want to do so, and I disagree that anyone should offer any alternative land to grow cabbages, expropriate etc. As long as they pay the external cost of their benefit, which may be far higher than the income that they can get from growing cabbages. But that´s their choice.
The rights of landowners are at the mercy of the state and it's not as if you can do what you like with 'your' land in the UK, anyway. I don't see how LVT makes a difference to that.
Kj, correct. The irony is that S is a real life large landowner who owns some "farmland" at the edge of Swindon and who makes most of his money by occasionally getting planning for a few houses and selling it off. So he's not exactly a cabbage fan himself.
UKL, yes of course.
Just because I own a hammer doesn't mean I can bash somebody over the head with it. Just because I own a hi-fi doesn't mean I can play it full blast day and night. And so on.
And while these Faux Libs and Homeys say they should be allowed to do what they want with their land, they are all in favour of The State stepping in to protect them and preventing their neighbours from what they do on their land.
Funny that, I've never worked out whether they realise that they are also somebody else's neighbour.
" the Human Rights of the individual to own and hold land without interference."
There isn't such a right in the UK.
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