Institute for Economic Affairs on top form

From the IEA:

* The UK could have a tax system that has a low negative effect on welfare and efficiency, with small compliance and administration costs; a system that is nondiscriminatory, avoids double taxation, and that is transparent and easy to understand.

* As such, we suggest that the TV Licence, Inheritance Tax, Stamp Duty Land Tax, the stamp duties on buying shares, the Apprenticeship Levy, Vehicle Excise Duty, Capital Gains Tax, the bank surcharge, and duties on alcohol, tobacco, and gambling, could be scrapped.

* Other property taxes such as Council Tax, the Community Infrastructure Levy, business rates and affordable housing and other s106 obligations, could be replaced with a single land value tax. Under this proposed system, disincentives for property improvements and housebuilding would be removed.

We would have added “the TV Licence, Inheritance Tax, Stamp Duty Land Tax… Capital Gains Tax” (as well as other minor taxes such as the Annual Tax on Enveloped Dwellings and the non-dom levy) to the next list of taxes which relate fairly directly to ‘wealth’ i.e. primarily land and buildings to make it clear to people that LVT could start off as a like-for-like swap; most people would pay much the same on average over a lifetime.

In more detail…

A land value tax

Our solution to the problems raised with the four previous taxes would be to create a land value tax system to provide a reliable source of income to local authorities, encourage development and reduce complexity in the tax system. A single land value tax would tax the owners of property only on the value of the land itself. Buildings, improvements and land use would be of no concern to the tax system, avoiding the current disincentives for property improvements or housebuilding.

Such a tax would also enable councils to receive part of the planning gain (the increase in the value of land when it is re-zoned for development, such as agricultural land being granted planning permission for housebuilding), giving local communities a major incentive to allow development.

We don’t understand the insistence on LVT being a ‘local tax’, which would be inherently regressive, but it’s an excellent start.