Mayor of London Sadiq Khan, has re-established the London Finance Commission to consider the need for further devolution of fiscal powers to London and study the potential for land value taxation.
He made the announcement in response to a report, Tax trial – a land value tax for London? written by the Land Assembly Planning Committee, which examined incentives to bring development land forward.
The report made a series of recommendations:
- The mayor should assess the powers he would need to implement and operate a land value tax to replace the three basic property taxes: council tax, business rates and stamp duty land tax.
- Commission an economic feasibility study that would model the implementation, operation and likely yield of a LVT in a geographically defined area of London.
- If the commission decides on its feasibility, implement the LVT in a limited geographical area of London for testing, encouraging housing development and funding supporting infrastructure, such as in Old Oak Common.
Khan committed to taking recommendations of a land tax value pilot forward with the Treasury – in the context of tax devolution in other areas.
In its last budget, the government invited Transport for London to carry out a technical study on the potential of capturing land value uplift, which will be discussed with the planning committee.
The Old Oak and Park Royal Development Corporation has also indicated it would like to pilot some of the other recommendations in the report.
Assembly member Tom Copley, author of the report, said: “A land value tax would discourage land banking, where developers sit on land waiting for its value to rise without building on it.
“This would incentivise the building of news homes quickly while raising much-needed funds for investment. It would not be an additional tax, but would replace existing property taxes like council tax, business rates and stamp duty.
“Land value taxation has wide ranging support from across the political spectrum, from Winston Churchill to John McDonnell, and economists on the left and right.
“With the London Finance Commission report due to be released this week, we encourage the mayor to take the recommendations a step further by seeking the powers to trial a land value tax in a part of London.”
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