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Site Value Tax : An Overview

Site Value Tax is a taxation reform included in the Irish government’s current Program for Government and the National Recovery Plan 2011-2014. It levies an annual charge on the value of all developed and undeveloped zoned land including the site under every building in residential use.  It does not include un-zoned land i.e. agricultural land, forestry and peatlands.  It does not include developed commercial property currently subject to local rates but it is expected that SVT will replace commercial rates in due course.  It does however, include land zoned for commercial uses not currently subject to rates.

Research by Smart Taxes and other groups has shown that SVT has clear benefits over other kinds of property taxes from a number of perspectives; macro and micro-economic, environmental and social. It will assist local and central government to plan and develop effectively while providing a sustainable source of income. Key research documents from Smart Taxes are available on this page.. A book compiling these and additional research papers is forthcoming. A policy brochure is available in print and online below:

Site Value Tax FAQ

What is the Difference to a Property Tax?

Site Value Tax differs from a property tax in that the property tax is imposed on the value of a property (i.e. the building and the site), while Site Value Tax is based only on the value of the site or land in the property parcel. Land value derives from location and service access, meaning that, for instance, a site in a central location with good transport will pay more than a relatively isolated site. It would also apply to undeveloped zoned land, empty building sites and derelict sites.

Land Value Taxation and other Measures for Raising Public Investment Revenue: A Comparative Study

What are the Economic Benefits
Unlike other taxes, Site Value Tax does not impose a cost on economically beneficial activity, as VAT does on consumption or PRSI does on employment. Instead, it charges for the benefits of the land’s particular location, which is not created by individual land-owners. Location benefit comes from access to services, be they publicly-funded infrastructure and amenities (roads, schools, parks, etc.), or the community at large (shops, etc.).  Site Value Tax enables the investment that creates this location benefit to be returned to the community rather than to the private land-owner.

In contrast to commercial rates or other property taxes, the investment of landowners to improve their property is not taxed. Site Value Tax recognises that this type of investment is productive, and should not be discouraged. What should be discouraged is unproductive activity such as land speculation.  Since Site Value Tax taxes all zoned land, it discourages land hoarding and speculation.

Site Value Tax will also replace transaction taxes such as  Stamp Duties, Development Levies and Part V type obligations. These are a barrier to the purchase and sale of land, which means that some land-owners will hold onto their land without being able to develop. Instead, we should encourage such landowners to sell their land if they are unable to develop profitably, and so create a clearer market in development land.

For more information on the economic benefits, see:

Macroeconomic Case for a Land Value Tax Reform in Ireland

How Much Money Can it Raise?

Site Value Tax can earn over €1.8 Billion euro annually. See:

Land Value Tax Revenue Potential in Ireland

Also, see this presentation by Constantin Gurdgiev, discussing the revenue potential:

Environmental Tax Reform – Constantin Gurdgiev from Digital Revolutionaries on Vimeo.

A further study on revenue potential is forthcoming.

What are the Environmental Benefits?
Land is a finite resource. By imposing a charge on the ownership of land based on its market value, Site Value Tax discourages over-zoning and creates incentives for owners to use land as effectively as possible. This will ensure that land is used more efficiently in future and mitigate urban sprawl.

For more on this topic, see the European Environmental Agency on why Site Value Tax is an effective environmental tax.

What are the Social Benefits?
Site Value Tax will encourage economic activity and will discourage the under-use and dereliction of properties. It will also provide a revenue stream for local and national government investment in public services. The tax will include temporary exemptions for homeowners who purchased their land at the height of the boom, while senior citizens will be able to defer payments until their home changes hands. The tax also helps infrastructure investment by allowing the government to capture the rise in land values caused by infrastructure creation. This prevents public expenditure serving to enrich private landowners at the expense of taxpayers.

Stephen Reed, former Mayor of Harrisburg, discusses the effect that Site Value Tax had upon the city’s economy:

Environmental Tax Reform – Stephen Reed from Digital Revolutionaries on Vimeo.

What Needs to be Done to Implement this Tax?

Smart Taxes has prepared a comprehensive report on the implementation of Site Value Tax. This report has been submitted, and includes a Roadmap, outlining the key steps to be taken. The steps are clear and straightforward. What is needed is political will. The necessary components for implementing this tax are outlined in the Smart Taxes documents Implementation of Site Value Tax in Ireland and Site Value Tax – Budget 2011 Submission. As of April 2012, the most up-to-date implementation discussion is the Smart Taxes Submission to Property Tax Working Group.

Urban Forum Workshop

Much of the research and experience contributing to the Implementation Paper was derived from a workshop hosted by the Urban Forum Workshop. The papers and presentations that contributed to this can be found below.

William McCluskey, Introducing a Property Tax: The Northern Ireland Experience

Dr. W.P. Prendergast (DIT),  SVT – The Information Implications

Joern Jensen, Development of the Danish Valuation System

Land Value Tax Showcase

Fred Harrison, Valuation and Implementation: The International Experience

SVT – Long and Short Term Implications

Further Information

Dave Wetzel – Land Valuation Taxation

Brian Lucey NAMA Workshop

Ronan Lyons NAMA Workshop

Richard Douthwaite NAMA Workshop – parts 1-3

Constantin Gurdgiev NAMA Workshop – parts 1-3

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Continuing the Discussion

  1. Site Value Tax Budget Submission – Press Release – Smart Taxes Network linked to this post on November 2, 2010

    […] Site Value Tax […]

  2. Smart Taxes Welcomes Announcement of Site Value Tax – Smart Taxes Network linked to this post on November 25, 2010

    […] Site Value Tax […]

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