The government’s plan to introduce a development land tax is “seriously flawed”, according to an independent study commissioned by the RICS.
The report claims that the tax, which was mooted in Kate Barker’s report as a “planning gain supplement” to fund infrastructure, is based on a “misunderstanding of how land is valued, how planning gains arise and how the property market operates”.
It maintains that such a tax would involve complex valuations and computations for all sites, and would be payable before development is complete.
Instead, RICS is backing the “tariff” system that is being developed in Milton Keynes, an alternative also promoted by the British Property Federation (BPF).
RICS chief executive Louis Armstrong said: “Changes of this kind must be evidence-based. RICS has supported previous attempts to capture development gains for the public benefit.
“However, despite the fact that its introduction would be a bonanza for chartered surveyor valuers, the proposed PGS looks unlikely to help in easing the supply of land for housing.
“Moreover, without a political consensus over such a tax it would encounter the same problems that crippled previous attempts to tax development gains.”
“The planning tariff approach looks a better bet, though operating such a system in Hackney or Tower Hamlets would be a great deal more complex than doing so in places such as Milton Keynes where it is already working.”
The research was carried out by land tax specialist Professor Tony Johnson and general taxation expert Chris Hart.
References: EGi Legal News 18/10/05