Killer Arguments Against LVT, Not (483)

The Homeys claim that developers and builders would be “hit” with LVT and either go out of business or “pass on the tax” to purchasers.

Putting fancy economics to one side for a moment, the most important point here is that actual developers/builders would pay a lot less in LVT than they currently do in land- or planning-related taxes!

Here’s an overview of all the taxes which are currently triggered by development:
Landowner – sells land, foregoes agricultural land subsidies on the area sold and pays Capital Gains Tax or corporation tax on the unearned capital gain.
Developer – buys land and pays Stamp Duty Land Tax
Developer – pays planning fees, Community Infrastructure Levy, s106 contributions and incurs costs of planning obligations.
Developer – claims VAT refunds as new housing is zero-rated for VAT, a kind of subsidy.
Developer – sells some “affordable housing” units at a low profit margin to a Registered Provider such as a Housing Association (this can be seen as a tax of nearly 100% on that fraction of the potential development profit) and sells the rest to owner-occupiers and private investors for a profit. The developer’s profit has two elements – the unearned increase in the value of the land since it was first acquired and the earned element (return for risk and effort) – and the total profit is subject to normal corporation tax.
Owner-occupiers and private investors – pay Stamp Duty Land Tax when they buy the finished homes.

All these land- and planning-related charges fees and taxes could and should be scrapped and rolled into LVT as part of the initial shift. The average total bill (less VAT rebates) is tens of thousands of pounds per new home (depending on where in the country it is). Even if LVT became payable as soon as planning is granted, the average would be about £7,000 per home per year. It seems sensible to give developers/builders an exemption for the first year or two after planning is granted, so developers/builders might end paying nothing at all.

As to “passing on the tax”, in the next breath the Homeys will also claim that LVT will see house prices plummet (if they haven’t already claimed that in the previous breath), which is tacit admittance that LVT cannot be passed on.

The KLNs are also equal and opposite to the KLN that farmers won’t be able to afford to pay LVT and will be forced to sell all their fields to developers. So a complete and utter mess and an epic fail, as per usual.