Killer Arguments Against LVT, Not (445)

In response to Vince Cable’s LVT for Business Rates swap idea, let’s watch a professional KLN-disseminator at work:

John Webber, Head of Business Rates at Colliers International… said: “Whilst it is good to see the Lib Dems are taking the issue of business rates seriously, it is a shame they did not think through the disastrous decision to delay the business rate revaluation from 2015 to 2017 which has caused so much trouble when they were in Coalition and Vince Cable was business secretary!”

The Lib Dems had little say in the Coalition, that was the Tories staving off the inevitable.

“… the idea to replace business rates with a full commercial landowner tax is not the answer. And reading the report in depth makes you think the Lib Dems have drifted into Alice in Wonderland.

Strange jibe, seeing as he takes guidance from Alice In Wonderland: ‘When I use a word,’ Humpty Dumpty said in rather a scornful tone, ‘it means just what I choose it to mean–neither more nor less.’, as we shall see below.

“Business rates were set up to pay for the amenities and services businesses use in the community.

Outright lie. They are a successor tax to Poor Rates which Queen Elizabeth I introduced to pay for a rudimentary welfare system. But let’s assume it’s true, LVT is just a charge on the “amenities and services” provided at that location, for which the landlord then charges rent. Nobody has ever managed to explain why landlords should get most of their ‘raw material’ for free.

There is surely no dispute that they should pay something for these services. To replace the levy with a total land tax on landowners would impact on land values…

That’s a feature not a bug.

… and discourage investment into property generally…

No it wouldn’t. LVT is a sunk cost, for investors it is balanced out by the fact that land is cheaper (which is a bad thing, according to him). Unlike Business Rates, it would not deter improvements, buildings and so on.

… (among other things, this would not be good news for pension fund holders).

As if pension funds don’t also invest in proper businesses, who will benefit from this. It all averages out.

“The additional tax would also result in landlords getting the money back by hiking up the rents they charge to occupiers…

Woah! If landlords can simply pass on the tax, then his first claim, that land prices would fall can’t be true. Make up your mind, dickhead.

And funnily enough, when it suits them, the Vested Interests are happy to argue that Business Rates is economically borne by landlords in terms of lower rents (see Executive Summary on page 6 of this).

It’s a a bit Humpty Dumpty, isn’t it?

“We would therefore have a system whereby businesses would end up paying more to the landlord but unlike the present system would be unable to appeal against their combined rent and rate bills that the landlord would introduce. So how would they benefit?

Market forces, you twat. The same market forces that makes landlords bear three-quarters of Business Rates (link above) would make them bear an even larger share of LVT. The landlord in turn is perfectly entitled to appeal if he wants, the tenant couldn’t care less as he is unaffected.

“Other parts of the report also show naivety. The Lib Dems claim that land will be valued on its “best permitted use” and that this would encourage landowners to work their land better. This implies they are not doing so now and ignores considerations of commercial viability. They seem to think that without a land tax, land will be sitting empty and largely undeveloped, again ignoring the commercial realities of development in today’s marketplace.

Jolly good, if it is true that all landowners are already putting land and buildings to their “best permitted use”, then they have nothing to worry about, eh? He’s the expert, and must know that most landlords are making the best of it, but a minority clearly are not.

“Even more concerning is that they admit the system would not produce enough tax income and the gap would need to be filled by also raising corporation tax. Again, I question how businesses would benefit from that?

This is more DoubleThink. Elsewhere in his screed he calls for Business Rates freezes and reductions; he then claims that Vince’s suggested LVT revenues would be overall lower than total Business Rates i.e… a freeze and reduction, overall. Why is the former good and the latter bad?

“This leaves a ‘gap’ which would also need to be ‘filled’ by hiking other taxes, like corporation tax.”

He is silent as to which taxes he would increase to compensate for freezes and reductions in Business Rates. (I’ve seen this Home-Owner-ist magic before – LVT would simultaneously be unaffordable, yet bring in insufficient revenues.)

“…What the Lib Dems are therefore suggesting is a complicated system that many would struggle to make evidence based. The only other land tax systems currently in Europe are used in Denmark, Estonia and Russia. Do we really want to follow them in our approach to land?”

Yes.