UK Lib Dems To Debate Land Tax Proposals

by Robert Lee, Tax-News.com, London

30 August 2011

The rift over tax policy in the UK's coalition government looks set to be highlighted at the Liberal Democrat's upcoming party conference, where members will debate proposals to make a new system of land taxation into party policy.

The Liberal Democrats, the junior party in the coalition, have long been in favour of higher taxes on the wealthy. Indeed, reports that senior party figures are pressing the Conservative Prime Minister and Chancellor for the introduction of a mansion tax have formed part of the ongoing debate over reducing the UK's top rate of income tax. The depth of the coalition's rift on the subject could well be exposed this September, when the Liberal Democrats discuss a paper on local government finance at their party conference.

The paper, to be examined in a consultative session on September 17, will be presented as the first stage in the development of party policy for local government finance. The paper includes the suggestion of a revised form of property taxation, designed to make it more efficient, targeting wealth, and relocalizing control of rates. It proposes a move to a land value tax, based on the unimproved value of land.

Property taxation would shift from what the paper says are unfair non-residential rates and an outdated council tax system to a land taxation regime, with differential rates for residential and business properties. In particular, council tax would be scrapped, and replaced by a residential property tax, based on regularly assessed land value. Party members are asked in the paper to answer the following question - "Is an improved residential property tax an appropriate means to taxing personal wealth?".

The paper also poses a question on the subject of a mansion tax, which, were members to accept it as party policy, could become the means with which the Liberal Democrats aim to secure a quid-pro-quo deal within the coalition over a cut in the 50% rate of income tax. The paper asks whether a 1% national levy on residential properties valued at more than GBP2m, in addition to a revised property tax, should be imposed, revenues from which would be allocated to local authorities based on their need.

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