IFS backs Land Value Tax

In its Green Budget 2014, the Institute for Fiscal Studies (IFS) backs the replacement of Business Rates with a Land Value Tax on all commercial land.

In chapter 11 of the Green Budget, authors Stuart Adam and Helen Miller criticise the current system of taxes on non-domestic property, i.e. Business Rates. The current system of Business Rates imposes a levy on the estimated market rental value of non-domestic property. Business Rates is paid by the occupying business, not the owner of the property. If rental values go up (for example, through increased footfall) the occupier suffers increased costs but the owner gets a free benefit. This creates a disincentive for the use and development of business property.

The authors propose to replace Business Rates with a tax based on the value of what each site would be worth in the absence of any buildings on it, i.e. a Land Value Tax. According to them, such a tax "would remove all together the disincentive to develop and use property that business rates creates."