Saturday, 16 October 2021

Killer Arguments Against LVT, Not (490)

One objection that often floats about is that while you can establish reasonably reliable relative values for generic types of land and buildings - urban homes, factories, offices, retail premises, farmland etc, there will always be a few outliers.

I agree, things like stately homes and theme parks in the middle of the countryside (or ski-runs in the Cairngorms or whatever outlandish examples people come up with) aren't bought and sold very often. It's difficult to say what they'd sell for or rent for, and how that would be split between building value and location value.

So what?

Even with conceptually simple taxes like income tax, there are endless grey areas. Who is and isn't UK resident? Where's the line between a gift out of gratitude and a payment for services? What's a taxable dividend and what's a non-taxable return of capital? If a shareholder also works for a company, is the money they get from the company dividend, wages or a loan?

There are thousands of pages of legislation, guidance and legal cases on all these issues; it's sometimes impossible to understand why a Tax Tribunal decided that somebody's receipt from a certain source was taxable or not, and sometimes they decide the opposite way round to what you'd initially expect, given the basic facts. But they are the Tribunals and I'm not.

Nonetheless, the bulk of what you'd think is taxable income is actually taxed; some people wriggle through loopholes; others have to pay tax on stuff where the sensible person would assume it's non-taxable. Some tax is never paid and HMRC just writes it off. Overall collection rates about 90% of theoretical receipts. And we accept this as 'good enough'.

Conversely, LVT assessments for 98% of land by value are a doddle i.e. developed land in urban areas where there is plenty of data on rents and selling prices. Farmland is about 2% by value, that's not too difficult either (the tax would be tens of pounds per acre per year at most, unless we just exempt it). And collection rates will be very high - who cares where the owner lives? If they run up massive arrears, the land and buildings just get auctioned off and they get the balance.

As to stately homes and theme parks, valuers just have to make up some general rules or haggle on a case-by-case basis. If they end up getting the benefit of the doubt and are under-taxed, so what? Most of the stately homes which the National Trust owns were given away by owners who couldn't afford the running costs, and even with their membership and entry fees most of them aren't particularly profitable, so they can't be worth much, possibly next to nothing i.e. not worth taxing.


Bayard said...

If we did have LVT, I am sure powerful landowners like The National Trust would wangle an exemption on the grounds that they were a "charity".

Mark Wadsworth said...

B, again, so what?

It's nearly all landowners who are preventing LVT in the first place. Conversely, although they constantly attack Business Rates, they aren't making much headway.

And I'd rather have LVT with a few silly exemptions than none at all.

Bayard said...

That wasn't supposed to be a KLN.

Mark Wadsworth said...

B, true.

Bayard said...

"If they run up massive arrears, the land and buildings just get auctioned off and they get the balance."

If you are going to say this, I think you should point out that this happens already, where someone or some organisation is in massive tax arrears: they send the bailiffs in and the debtors' assets are seized and sold to pay the debt, in this case their prime asset is the land. Otherwise it look like you can run up tax arrears and not have your land seized, unless those tax arrears are LVT.

Mark Wadsworth said...

B, excellent point, I've made that before. Doesn't matter if it's income tax arrears or LVT arrears, comes to the same thing.