Advisors.ie

Of the main changes we could consider in the near future from a national taxation perspective, none holds the potential for positive outcomes to the same extent as Land Value Tax (LVT) or Site Value Tax (SVT). Below are several points looking at why this is the case:

1. It is widely agreed that we need to spread the tax base to reduce taxes on employment to be replaced by taxes on assets, and to create a less volatile tax base. This can be achieved with Site Value Tax. In terms of ‘fairness’, it is important to remember that only 50% of properties in the country have a mortgage on them, and for that reason there is also taxable capacity in the market for this, in conjunction with a reduction in income taxes.

2. The Site Value Tax currently included in the Four Year Financial Recovery Programme, is such a tax. It applies only to land zoned for development, or already developed.

3. Land is a fixed asset. A high proportion of its value is dependent on its area, its location and its proximity to related infrastructure. Infrastructure which is created via public expenditure but rarely ever re-captured for the value it adds to surrounding areas.

4. Site Value Tax should therefore be a substitute for less sustainable forms of property tax, such as stamp duty income tax or other taxes on employment.

5. The provision of new infrastructure generally increases its value, and a site value tax yields increased revenue, which pays for the infrastructure over time rather than development levies at construction stage.

6. All land owners who benefit from the new infrastructure contribute to its cost, not just the owners of development land as at present – now not necessary after changes to previous point

7. For these reasons a land value tax should be used as the main tax source for Local Government, whose main brief is the provision and management of infrastructure.

8. It would eventually also replace Commercial Rates and Central Government contributions.

9.It could also be used to fund other Agencies providing national infrastructure, both environmental and social.

10.It will generate a higher tax return from wealthier citizens and a lower return from the poorest.