According to the Labour manifesto, published last week, the party’s leader Jeremy Corbyn suggests he may replace council tax and business rates if he is elected as Britain’s next prime ministers on 8 June.
“We will initiate a review into reforming council tax and business rates and consider new options such as a land value tax, to ensure local government has sustainable funding for the long term,” the manifesto reads.
Tory ‘land value tax’
Dubbing it as a ‘garden tax’, the Conservative Party has blasted the move after predicting that Corbyn may impose a 3% land value tax that could apply to existing property owner whose properties increase in value because of improvements in local infrastructure.
The Tories claim those with land adjoin their home will be hardest hit, calculating that in the south-east of England, the cost of the land value tax for the average home would be £5,539 – nearly four times the current £1,466 average cost of council tax in the region.
The criticism comes as a surprise last month it emerged that the Conservative manifesto also hinted at a possible land value tax.
“We [the Party] will work with private and public sector house builders to capture the increase in land value created when they build,” read the document.
Not a ‘garden tax’
Frank Nash, tax partner at UK accountancy firm Blick Rothenberg, told International Adviser it is “very unlikely” a land value tax would apply to taxpayer’s gardens, explaining such a move would cause “uproar”.
“It’s more likely to be aimed at developers, who are perceived to be sitting on speculative land waiting for prices to rise before building is complete, so the politicians would say ‘if you’re going to do sit on development land for 10 years then we’re going to tax you’.
“However, there’s insufficient evidence to suggest this is what developers are doing as delays in building homes is often subject to planning regulations and market conditions such as mortgage approvals,” he said.
Nash added that a similar measure – the controversial planning gain supplement – was set to come into force in 2005, which he says was subsequently dropped as unworkable.
“This land value tax may be similar, which is to get a levy on idle land until it is productive such as development land. We don’t think some forms of productive land, such as farm land, market garden land, leisure land such as fisheries and even allotments, should be taxed as that would ultimately lead to a rise in inflation in the food that is produced,” he said.
