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Land tax is 'back on Government agenda'

Accountants fear the Government is considering reintroducing some form of land value tax to raise revenue and encourage housebuilding after the general election.

George Bull, of accountants Baker Tilly, and John Whiting, of Price Waterhouse Coopers, said official reports on affordable housing suggest a revival of the 1970s Development Land Tax.

Unlike existing taxes that are imposed on income gained from land or gains realised when it is sold, they claim a new tax on unrealised gains is being contemplated. This would hit landowners who do not allow housing to be built on their property, such as Roland Coleman of Kent who was described as a "local hero" by neighbours this month after he refused a £4m offer to develop his fields near Rochester.

The Office of the Deputy Prime Minister's report, Sustainable Communities: Homes for All, published this week, said the Government accepted proposals in Kate Barker's report, Securing our Future Housing Needs.

Ms Barker, a member of the Bank of England's monetary policy committee, said in her report: "Land could be taxed according to its market value and land that had a high value and was therefore in greater demand for use would attract a higher tax liability to encourage its development or its most efficient use.

"Since the most profitable of these possible uses would often be residential development, this could increase the amount of land that landowners wish to sell for housing development."

Mr Bull said: "Most of the proposals are aimed at bare land, whether undeveloped or brownfield, but Ms Barker also seems to contemplate a wider form of taxation.

"This might be imposed, for example, on property owners who have enjoyed an uplift in values that can occur as a result of public investment."

Mr Whiting said: "It is not unreasonable to say that what is being proposed or at least considered is the revival of property taxes from long ago.

"The argument seems to be that when planning authorities give permission for development, there is a substantial increase in land values and the community ought to share in that.

"The Government has been thinking about reintroducing some form of development levy since extending the Jubilee Underground line into south-east London caused property prices to go up dramatically."

The Office of the Deputy Prime Minister referred questions to the Treasury which said it accepted Ms Barker's proposals in principle but a decision would be made by the end of this year. Ms Barker's report stated: "Land value taxes could be levied on all undeveloped or vacant land across the country or land allocated for development with outline planning permission or full permission.

"The combination of a potentially wide tax base and the fact that land is physically fixed, which makes avoidance and concealment of the asset and its tax liability very difficult, point to land value taxation as a good method of raising revenue without distorting behaviour."

 

Source: Telegraph, February 4th, 2005