I am glad to see an article published in the Sunday Tribune on the subject of implementing site value taxes in Ireland. Tom Dunne of the School of Real Estate and Construction Economics in DIT wrote an article entitled “A yard stick for working out property taxes” and no better man to do so as he has been a leading and persuasive advocate for land value taxes in Ireland for some time. However, Tom is also an trenchant advocate for local government reform. Smart taxes is a big fan of local government reform and we were greatly pleased to see that a review of local government boundaries and remit is part of the Revised Programme for Government. So what is the problem, say you?
The problem is that Tom always conflates these two issues and in the process make the job of reform look totally unmanageable. He starts off so well…
“If such a tax were to be brought into operation the implications for planning are considerable. It is likely the pressure for rezoning would be reduced as, once zoned, a tax liability would arise on the land. The planning system is likely to work more satisfactorily if the pressure for speculative rezoning is eliminated.
All in all a site value tax has the potential to improve the planning system, reduce property speculation, lead to the more sustainable use of the existing stock of property and provide for local fiscal responsibility.
but ends up on a low note thus…
These are important gains but they would only be achievable if a properly resourced administrative structure was put in place and backed by appropriate legislation and reform of local authority boundaries. This is a big undertaking likely to take some years to bring to fruition.
We agree with his first two points in the methodology to be adopted to bring about the necessary reforms.
1) A fundamental requirement for fairness is an accurate assessment of the value of the site, separate from the value of the buildings on the site… The proposal in the programme for government to amend the Data Protection Act and maintain a House Price Database is useful here but it is the ability of the public to check property values at a very local level that is needed to build acceptance of site value taxes.
and
2) The second requirement is the creation of an accessible and publicly available system for defining and identifying individual property interests.
but not that..
3) The third requirement is a need for local authority boundaries that relate in a realistic way to the spatial dispersion of economic activity and the coherence of settlement patterns now prevailing in Ireland. (link to article)
Land or site value tax can be introduced by central government through a new or expanded valuation office working with the existing local authorities. The revenue in the first instance, is needed ot replace stamp duty in central coffers. It is also needed to replace commercial rates and development levies but this can be achieved by remitting some of the LVT income back to the local authorities as per an agreed formula.
The income from LVT does not have to match local government expenditure within their functional area. Indeed there is a strong argument that the level of LVT should be set nationally and not independently by each local authority, otherwise an unwise, ultimately unproductive and self defeating policy of beggar-thy-neighbour may ensue as local authorities seek to attract high value activities by reducing LVT rates. The information garnered under LVT, illuminating the efficiency or otherwise each local authority infrastructure investment relative to value added and management overheads, will be invaluable when the time comes to reform local government boundaries – as part of a separate initiative. Then and only then, when local authorities boundaries conform to rational economic watersheds, should there be consideration of allowing local authorities to keep the greater part of LVT raised within their functional area.
In short, lets get on with the very clear and uncomplicated tasks of a land valuation and the registration of all interests in property in Ireland without further equivocation.
