Taxes on Land Rent

37 Pages Posted: 2 Sep 2016 Last revised: 10 Nov 2016

See all articles by David Ingles

David Ingles

Australian National University (ANU) - Crawford School of Public Policy - Tax and Transfer Policy Institute

Date Written: September 1, 2016

Abstract

There is increased interest in land taxation in Australia and internationally, as reflected for example, in the Henry report on tax reform in 2010 and the UK Mirrlees Report in 2011. This interest stems from the immobility of land as a factor of production, which stands in contrast to other factors such as capital and labour. Logically, immobile factors can be taxed more heavily and with less efficiency cost than mobile ones. The interest in land taxation revisits the work of the 19th century reformer Henry George but in fact has antecedents going back to Ricardo and before. By making land more expensive to own, we can (somewhat paradoxically) make it cheaper to buy. At the extreme a 100 per cent tax on land rent reduces the capital value to the annual rental value; that is, to around 3-5 per cent of the untaxed value. A 5 per cent tax reduces the capital value of land by half, and a 1 per cent tax reduces it by 17 per cent. However the lump-sum nature of land taxes – and their high visibility to taxpayers – makes them politically very difficult to raise. The theoretical revenue available, which is one-third to one half of all Commonwealth tax revenue, may be practically unavailable.

Keywords: Land Tax, Tax Reform, Tax Revenue, Stamp Duty, Local Rates, Henry Review, Mirrlees Report, Efficiency

Suggested Citation

Ingles, David, Taxes on Land Rent (September 1, 2016). Tax and Transfer Policy Institute Working Paper 6/2016, Available at SSRN: https://ssrn.com/abstract=2833110 or http://dx.doi.org/10.2139/ssrn.2833110

David Ingles (Contact Author)

Australian National University (ANU) - Crawford School of Public Policy - Tax and Transfer Policy Institute ( email )

ANU College of Asia and the Pacific
J.G. Crawford Building, #132, Lennox Crossing
Canberra, Australian Capital Territory 0200
Australia

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