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Scottish LVT “challenging”

The Scottish Land Commission has on its website a report produced by the University of Reading on the prospects for introducing a land value tax in Scotland. The report sets off in the wrong direction by defining land value tax as a tax based on selling prices. The Scottish report, which uses the word ‘challenging’ thirty times in 119 pages, provides an excellent set of arguments against the use of selling prices for LVT assessment. The drawbacks of LVT assessment by selling price are set out in several articles on this web site. To summarise the arguments


  • LVT is perceived as a wealth tax, which it is not, since land is not wealth. A land title is a claim on wealth.
  • Land prices are reduced by an amount equal to the capitalisation of the tax payable; the tax cuts into its own base, which is like sitting on a log and sawing it off the main trunk. This is an important issue at the initial valuation, because land in commercial use is subject to the UBR, which is several times higher than land in residential use subject to Council Tax. This leads to an apparently low figure for commercial land values, from which the conclusion is drawn that a unduly high proportion of the LVT burden would have to fall on house owners.
  • Land price may include an element of hope value on the assumption that consent for development could be granted in the future. In the case of rental value assessments, that value is the value today ie it is current use value or the value on the assumption that the site has been developed in accordance with any planning consents already granted; there is no doubt on the matter.

The report neglects to refer to important documents which are available on this website, including the London Rating (Land Values) Bill 1938, and the Whitstable Land Valuation Surveys of 1964 and 1973. It is nevertheless worth reading as it includes a useful section on experience with LVT elsewhere. In most of the examples, LVT has been eroded over the years and in some instances disappeared entirely. It may be significant that all of the examples operated with capital value assessment, with rates of around 2%. Under annual rental value assessment, a realistic starting rate would be between 20% and 30%.

UK campaigners will be aware that before abolition at the end of the 1980s, the rating system operated on gross annual rental values, as does the present business rate. This makes the notion of an LVT based on annual rental value assessment easier to grasp. The authors of the Scottish report claim that it would be difficult to explain LVT to the public. I would have thought that it could be done with the aid of diagrams on two sides of a sheet of A4 paper or a one minute video.” style=”color: rgb(51, 51, 51); text-decoration: underline; outline: none;”>