I suggested yesterday that we should tax vacant properties, heavily. It is an idea I first proposed for the TUC in 2009. I stick by that idea. I think its time has come.
I also think we need to tax land more comprehensively. Council tax is a bad tax: it is not local and should be. It is not really within council's control, and should be. Worse, it is capped, so it is regressive. Proportionately it is charged most heavily on low value properties as if it is a service charge when it should be a tax. And it does not capture land value as a tax base, which is madness when it is one that is readily available and a clear indicator of wealth, which drives much of the social divide in the UK.
But there are problems in taxing land. Ownership is hidden, as the latest Guardian survey shows.
A significant amount of land has never been registered in the UK; if it has not changed hands much of it does not need to have been. Wealth is therefore untraceable.
And now the government is proposing to sell the Land Registry that could be custodian of data on this tax base - which has to be the most absurd act as in future we would need to then ask a private company for the data to impose a tax charge.
What we actually need is a register of all land in the UK.
We need to know who the beneficial owners are - the people behind the names that claim to own land when they're just front companies in the BVI (and here we're talking about supermarkets as much as the wealthy).
And we need to say you forfeit your land if you do not register. It's really quite straightforward as sanctions go, and effective.
We can tax land.
We need to tax land.
But we need to find who owns it first if this is to be done in an appropriate fashion.
A commitment to that process should be in every manifesto in 2015.
I wonder though, will any do it? And if not, why not?
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Simple answer:
Levy tax on land. If it is not paid then that land is forfeited to the state.
You will soon see all the beneficial owners scurrying out of the shadows in that case. You cannot move or hide land.
Exactly. It can also happen slowly. I.e. the state claims a stake in the land for the amount of LVT unpaid (with future bills being a combination of LVT and ground rent on the state-owned part). This provides plenty of time for the beneficial owners to come forward. The state’s stake in the land is ultimately recovered when the land is sold.
The state only need physically lay claim to land at such point that there is no further land equity to claim. At this point I suggest the land is either auctioned-off or declared common land.
Land registration was introduced 90 or so years ago and was even then considered to be impracticable to make compulsory and immediate for all current holdings. The legal work to establish title and ownership of all unregistered land would be eye-wateringly expensive and time-consuming. It would make a lot of lawyers very happy though.
Registering all beneficial owners would be an even bigger task. For example, if you bought a house before marrying Mrs Murphy and then spent your married life together in that house, Mrs Murphy would have a beneficial interest in the house. However, having bought it before your marriage, it would appear in the Land Registry without her beneficial interest being registered. Everyone in that position would, under your proposal, be compelled to incur the expense of having their interests registered or losing them.
Why not?
The Land Registry is about 77% complete. Most of the unregistered parts are known to the local council and/or those making CAP payments. If the land is being used, i.e. rented, you can give the LVT bill to the renter and he will pass it on. If the land is not being used you just give a date to register title and if that doesn’t work, then, as Jeanolivier says, the state takes ownership and it’s auctioned off.
Tracing ownership is really no problem at all.
Carol
Are you talking theory or practice?
We have no LVT….
My parents brought their house in 1983. Its was new, they were the first owners. It was mortgaged until the early 2000. They have never registered their house. Land registry don’t know who they are. Many of their neighbours are the same.
I take you word for it
But I don’t believe you
Mortgages are secured at the land registry
Why don’t you believe Paul? He’s quite right. Compulsory registration didn’t cover the whole of England & Wales until 1990. Unless Paul’s parents live in an area where compulsory registration was introduced earlier, they would not have needed to register their purchase. The mortage lender will have held the paper deeds as security for their lending, then when the mortgage was paid off in 2000 they should have sent the deeds to Paul’s parents. None of this would have triggered compulsory registration. If Paul’s parents were to remortgage now, that would trigger compulsory registration. If they sell up, that will trigger. If they give the house to Paul, that will trigger. But as long as they are still the owners and don’t take out any mortgages, they do not need to register the land under the current triggers for compulsory registration.
Then I stand corrected
But this conflicts oddly with Mark Wadsworth’s claim
And my understanding
Who to, and how, do you give a date to register for ‘unused’ land.
How do you define ‘unused’? i.e. if I own a field and don’t rent it out or do anything else with it, other than leave it to fallow – what’s that got to do with anybody? Why should the state take my land?
Fallow could be fine
But ruined is not
they are not the asme thing at all
Maybe you don’t know that
If you want to retain ‘owner’ rights over a piece of land – whether used or not – then LVT should apply. This has ‘got to do’ with everybody because land is a finite resource and it is not being used optimally. Sub-optimal use of land by the wealthy (in extreme: land banking; more routine: under-occupancy) drive up prices for everybody.
You ask why the state should take your land (I’m assuming you mean as a result of failure to pay tax). This question may be asked of pretty much any tax: Why should they take a portion of money that you earn? However, there is a good reason why a tax on the value of land is fair – because the value of land (excluding whatever is done on it) is rarely the result of the owner’s individual endeavour. LVT would ensure people were making a contribution relative to the value that society/the state generates for them.
Max
Without the state, *anyone* could take your land. Unless you happened to have the biggest guns, of course.
Even genuine (if nutty) Libertarians tend to agree that the state should enforce property rights. That being so, it’s entitled to be paid for doing so, and if payment is refused then why should it enforce them? Once enforcement is withdrawn it’s only a matter of time before someone else moves in, and it’s probably fairest that that’s the state itself so the windfall goes to all of us. Also, the state usually has the biggest guns anyway.
Well, if there’s no record of who owns it then it must, ipso facto, belong to the state and then the state can charge whatever rent they feel like.
No, not at all
We have a system of unregistered land
No, what you have is a registry system that is incomplete. If you said that all unregistered land was going to be declared as state owned and come with a large rental after x date then I suspect that the registry will complete rather quickly.
I think this is about the UK not China.
Prior to the land being sold off it belonged to the commons which was administered by the state. This is why I said that any unregistered land held by a private individual/company would still belong to the state – no record of sale to indicate that it was passed out of the commons. Nothing to do with China.
This information is presumably also very important for the application of capital gains taxes, or most of the comprehensive income/consumption tax proposals?
yes
A survey of land value and ownership was done once: 1910-15 http://www.nationalarchives.gov.uk/records/research-guides/valuation-office-records.htm Before computers!
Richard, I’ve looked into all this and it turns out it is not true, and is not an impediment to having LVT.
1. HM Land Reg has got 80% by surface area but about 99% by actual value.
2. The missing bits is farmland, barely worth taxing, but that’s all down on the Rural Land Registry (the one where you have to register to claim your lovely subsidies).
3. All residential and commercial is down for Council Tax or Business Rates. So worst case, send the occupant the bill and tell him he can either pay it himself and knock it off the rent, or he can pass it on to the landlord (you know, the person collecting the rent).
4. “And we need to say you forfeit your land if you do not register. It’s really quite straightforward as sanctions go, and effective.” Agreed. That’ll cover the 1% of unregistered land by value.
I’ve covered all this time and time again, click my name for full article.
Mark
I’d love to say that is right
But it is just not true
You have no clue who the owner of an offshore company owing land in the UK is
So my comments stand
But I accept your assurance re value – that is welcome. Thanks
Richard
“You have no clue who the owner of an offshore company owing land in the UK is”
Indeed I don’t, but it is completely irrelevant. If land is registered to an offshore company, then you send the bill to that offshore company, wherever in the world. If they don’t pay, they forfeit the title under usual rules.
(You might as well say “I have no clue who all the shareholders in HSBC are” and so we can’t collect Business Rates HSBC’s head office in London. But we do get the Business Rates, don’t we?)
And the chances are, there is an occupant anyway.
If they are a tenant, it’s their choice what to do (already covered that), and if they are actually the real owner (i.e. they own the offshore company etc, which is the case with a lot of non-doms) then they’ll be happy to pay the bill and no more questions need to be asked or answered.
This is another argument I’ve heard before and dismantled accordingly, click my name for link to the article.
Mark
Nice idea
But forfeiture is extreme
Better to have the data to solve the problem
Not least because this is not just an LVT issue
And nor likely to be
Richard
Forfeiture does not have to be so extreme. It could be essentially a paper exercise in the state claiming a stake in the land. It would be a legal requirement that such stakes were purchased first as part of any future sale.
This would mean very few cases reach a point where the state actually has to physically claim the land. By this point, the majority of people would have been paying the tax for some time and have little sympathy for those who had evaded it.
I’m still not clear why beneficial ownership data is needed. One of the main pluses of LVT is that, regardless of Byzantine arrangements that might obscure ownership, the thing that is subject to the tax cannot be hidden, offshored or withheld. Where there is literally no record of where the bill should be sent, a public notice should be made (I believe a noticeboard in the town hall basement is the accepted location of such important public notices).
So is the problem the inability to enforce judgements against offshore companies?
Yes
And the fact that we do ot know if they are really offshore at all – i.e. are they really a front for the person sitting in the house who is evading tax
I think Mark has made some good points. Is it possible to enforce by putting a charge on the rent perhaps? (bit like child support etc.. deducted from wages?)
There are bigger issues of course – not least the collapse of UK banking as all its property loans go underwater. This may of course be a “good thing”. I believe that banks once used to loan money for purposes other than property speculation.
I don’t doubt Mark’s idea has merit
Richard
Richard: “we do not know if they are really offshore at all — i.e. are they really a front for the person sitting in the house who is evading tax”
We’re both tax advisors, we know that nine times out of ten, these fancy offshore structures are there to avoid IHT, SDLT, CGT and that nine times out of ten the occupant is the settlor, beneficiary, director etc. (these taxes raise tuppence compared to what LVT would raise, so let’s go for easy LVT instead of all the faff and nonsense).
But does it matter? We want to collect tobacco duty from smokers – we don’t need the name and address of the bloke buying fags at the fags counter, we just need to know that he pays the tax, and he does.
It’s the same with “mystery offshore landlord”, the tenant/occupier can pay it himself and deduct it from the agreed rent. Nine times out of ten, the occupier/tenant IS the landlord, so the ‘right person’ pays the tax. If it’s an innocent tenant, all he has to do is tell the council who is landlord/letting agent is, problem solved.
Ed: “Is it possible to enforce by putting a charge on the rent perhaps?”
No need, no need at all. In economic terms, it makes no difference who is legally liable to pay the tax, even if collected from occupier/tenant, the landowners pays it.
Two-thirds of business premises are landlord-tenant, and legally the tenant pays the tax, but the Vested Interests still mount a huge propaganda operation (i.e. The Taxpayers’ Alliance) against Business Rates (collection rate 98%) – because they know perfectly well that every £1 in Business Rates means £1 less in rent they can charge.
But as I said, these are marginal cases, in 99 cases out of 100, the bill can be sent to the registered legal owner, and if he doesn’t pay, title gets cancelled, just like if you don’t insure/tax your car, it gets impounded and crushed.
Excellent points all round. I agree with pretty much the whole substance of the article, the one exception being the need to capture beneficial ownership. Mark Wadsworth is absolutely right in saying that it’s unnecessary. It would be a burden on the Land Registry for no gain; it would make no difference to the level of tax payable, the entity billed for it, or the action taken for non-payment.
You miss the point
Tax is never just about cash
It is also about social issues – such as accountability
LVT handles all of those social issues without the need for ultimate beneficial ownership to be recorded.
You clearly want the beneficial ownership of all land to be made public, but trying to promote that approach by claiming that it is necessary for LVT to function is unseemly entryism. If anything, what you propose would make LVT harder to operate, by making it harder to get the land register to its target state.
I disagree
But we clearly do not view tax in the same way
Fair enough, we will have to agree to disagree.
I see it about raising cash in a way that does not hurt jobs and the economy (‘social issues’), not about ‘accountability’ in the sense of ‘the general public can find out who owns it’. Income tax returns in this country are not public documents, that’s just part of our tradition.
I do see it as ‘accountability’ in the same way as motorists pay their fuel duty, smokers pay their tobacco duty etc, there is no need to know their individual names and addresses, they have paid what’s due, they are ‘accountable’ for their actions.
As I mentioned before, the main reason why so many expensive homes are in silly offshore structures is to avoid IHT, CGT, SDLT and so on, which between them raise barely £10 billion. If there were no such taxes, then there’d probably be far fewer offshore structures, people would just stick it in their own names.
My ‘vision’ is to raise about £200 billion in LVT, so scrapping IHT, CGT, SDLT and Council Tax (£25 billion) is just part and parcel of that tax shift.
Cancelling CGT is not on – without if income tax fails
The taxes you are scrapping raise much less than £200bn
I think LVT advocates would be keen to drastically reduce Income Tax & VAT – some major taxes in terms of revenue there…
Richard, we are both tax advisors and we both know that CGT in itself is not really intended to raise much cash (and it doesn’t), it is there to prevent people turning taxable income into tax free capital gains.
It’s a tricky topic but other countries manage by taxing short term gains as income and exempting longer term gains. The UK did this under taper relief, for example. Whatever all these countries dream up, it’s all a bit of a messy compromise, it’ll never be better than that.
And I am perfectly aware of how much we get from different taxes, it’s all on the KAALVTN blog (click name for article), with that £200 billion we could just about get rid of the most damaging and regressive taxes (VAT and NIC), as well as Council Tax etc.
But each to his own – armed with £200 billion potential extra revenue from LVT/Domestic Rates, which taxes would you cut from the list?
I wouldn’t – I would have LVT raise much less
I have to say that I find that surprising. It is allowing a huge amount of unearned income to remain untaxed when there are so many public goods and services which are crying out for funding.