The Interview
Tony Vickers: Land Value Tax - what it would mean for business
6th December 2007
Shifting the tax burden from owners of small businesses to the owners of property on which those companies operate would, according to Tony Vickers, promote enterprise.
Tony Vickers (pictured) is well-known in West Berkshire. He is a long-standing Liberal Democrat councillor, and a former army officer – it was his work at the School of Military Survey, Hermitage, which brought him to the area in the first place. He is now a leading advocate of LVT – land value tax – a position to which he has come after years of research.One strand of that research was a survey carried out by the Federation of Small Businesses. “Small business people feel really hard done by, particularly when they improve their property and then find they’re paying more tax. So I realised that you don’t often get allies among the business community for a new tax. If you concede to a tax shift, shifting the taxes off people who are enterprising, so taxes off earned income generally, plus taxes on business property could be reduced. It’s a revenue-neutral shift off enterprise, to resource usage.
“In the second year of my three-year research fellowship at the Lincoln Institute in the States, we focused on Liverpool, because the city council there was really interested, but I took Newbury as a comparison, as a sort of ‘control group’.
“We had face-to-face interviews, 100 in Liverpool and 25 in Newbury as a controlled survey.”
That research showed the overwhelming majority of Newbury companies surveyed – 81 per cent – agree that businesses should not have to pay higher tax for improving their premises.
“Instead of the business occupier paying the tax, it would be the property owner. In some cases it’s the same business. A lot of small local businesses, as they went into decline, their main asset was the property. When they decided to jack it in and retire, they had got their little nest egg, like we all do when we buy our properties, and sold on.
“But if you separate their business as a business from their existence as an owner of property, in lot of cases it becomes unaffordable because in a prosperous town like Newbury the rents go up. The owner, who is probably hundreds of miles away, has no interest in Newbury, his property is just for profit, and he is doing absolutely nothing as landowner towards the prosperity of the town.
“That’s the justice of it [LVT]. You are basically putting the money back into Newbury that has been made in Newbury, or back into Liverpool that’s been made in Liverpool.”
Is there not a danger, however, that the landowner will simply increase the rent to offset the increase in tax? “If they try and do that, eventually they will reach beyond what the market can afford. And they will lose their tenants. But they will still have to pay the tax. That’s the difference.”
He cites the example of the Liberal Democrats former offices in Wharf Street, Newbury. The party vacated the 768 sq ft premises in Kendrick House more than two years ago, following David Rendel being ousted as the town’s MP. The premises are being marketed by Dreweatt Neate, but the party is still responsible until a new tenant is found. “If there was a change in the law, a change in the tax system, whoever owns that property, and I’ll bet you it’s not someone in Newbury, would either be coming forward with a development proposal, to redevelop that site. Because that building is dragging down Newbury, not helping Newbury.
“The tax system we’ve got is standing in the way of that building and that site being brought into use. There is a knock-on effect, blighting all of the surrounding building.”
Land Value Tax has been tried successfully elsewhere, said Mr Vickers. In Hong Kong, a similar system has enabled the government taxes on incomes and profits to remain low.
He also cites the example of Pennsylvania, which he describes as “an unusual part of the world”.
Its history has given it a diverse set of methods of local government, including the ways in which taxes are raised. “Like some cities in northern England, it went through a real depression in the post-industrial revolution and the knowledge economy coming in, with a lot of these old 19th century industry industries going down the tubes. Especially steel. And Pittsburgh (formerly a centre of steel production in the US) was one of the first cities to introduce Land Value Tax back in the 1970s. Another was the state capital, Harrisburg. Philadelphia is trying to do it – they had a very go-ahead mayor recently who got very close to changing the city’s laws on this, because it has the highest local income tax in America.
“If you’re an employer, you will just locate your business outside the city’s border, and that’s what happened.”
“Allentown is another interesting one, because it has only recently made the change. Allentown is within commuting distance of New York, and is very much affected by what’s happening in New York.
“They now have a city law which says that any new revenue requirement, say for example they had something like our Newbury Vision, will be funded by Land Value Tax.”
Mr Vickers said that there were numerous reasons why the practice was not widespread. One was that those in power were also those who would lose out. Another was that the technology needed to manage the relationship between land value and technology has only become available in the last 10 years.
Location Matters, Recycling Britain’s Wealth, is published by Shepheard Walwyn and costs £8.95.
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