THE GOVERNMENT is being urged to adopt a new property tax based on site values, covering all commercial, industrial and domestic properties, as a means of raising revenue and stabilising the market.
This approach is being advocated by a number of bodies, including the Urban Forum, which involves architects, engineers, planners and quantity surveyors, and Feasta, the Foundation for the Economics of Sustainability.
James Pike, a former president of the Royal Institute of the Architects of Ireland (RIAI) and founder member of the Urban Forum, said the Department of the Environment had “shown a great deal of interest in the idea”.
An annual land tax is also being considered by the Commission on Taxation, which may include it in its eagerly-awaited report to the Government later this year. According to Mr Pike, it would replace stamp duty and commercial rates.
Economist Dr Constantin Gurdgiev, lecturer in finance at Trinity College and former head of research at NCB Stockbrokers, is fleshing out the proposal for the Urban Forum, with a view to submitting a detailed report to the commission.
In terms of its impact on housing, Mr Pike said the land, or site value, tax “could be as high as domestic rates or it could be lower”. He believed it would generate at least “a couple of billion euro a year”.
If the site value tax was set at a higher level, “it could generate as much as income tax, replacing it altogether”, he said. “Employers and trade unions don’t want taxes that hit jobs, so it makes sense to tax land as an alternative”.
But he made it clear that a relatively small house in suburbia “would not carry a huge burden. What we need to do is to work out how much revenue needs to be generated and then have an equitable system for applying the tax”.
Mr Pike noted that the idea of taxing land, first advanced by American social reformer Henry George in the 19th century, had been “applied quite widely” in the US and Canada, where land values were “very modest” as a result.
Had it been applied in Ireland, he said we could have avoided the “mad frenzy” among developers paying exhorbitant prices for sites in Dublin.
“It would be an incentive to use land properly and consolidate development in cities and towns”.
He said its effect would be to make the best use of highly valued land while discouraging farmers from selling sites on the urban periphery and throughout the countryside. “If they had to pay a land tax of €1,000 an acre, they’d think twice”.
According to Mr Pike, a site value tax would encourage many landowners to seek “de-zoning” of their land to avoid having to pay tax at a higher rate. “The more valuable the location, the bigger the tax that would fall to be paid”.
He noted that 85 per cent of all land in the State is already registered, and it “wouldn’t be rocket science to register the rest”. A full land registration system, combined with a site value tax, would also be of great assistance to the proposed National Asset Management Agency (Nama). “They’re going to own a huge amount of land and this would help to value it”.
The proposed tax will form part of the Urban Forum’s “manifesto” for the local elections in June, Mr Pike said. “It could be a very important tax for local government, particularly for councils that do their job well and plan well for sustainable development”.
