Rebecca Evans AM, Minister for Finance and Trefnydd
This was published under the 2016 to 2021 administration of the Welsh Government
Today, a report by Bangor University, A Technical Assessment of the Potential for a Local Land Value Tax in Wales, has been published on the Welsh Government website. The report was commissioned by the Welsh Government as part of a suite of research relating to local taxation in Wales.
In March 2019, the Welsh Government commissioned Bangor University to explore whether local taxes in Wales could be based on the value of land, as an alternative to the current position which is an amalgamation of both land and property value, as well as factors such as household composition. Land value tax (LVT) exists in some parts of the world in various forms, and is purported to be a fair and progressive way of raising taxes for public services. However, the practical viability of moving from existing forms of local taxation to a local LVT has been found to be challenging.
The objective of the Welsh Government in exploring alternative forms of local taxation is to examine how to raise stable revenue for local services in the fairest way, with other advantageous outcomes considered where possible.
Bangor University has explored the feasibility of LVT as a locally-administered concept, replacing similar revenues to those that are currently raised through the existing local taxes, council tax and non-domestic rates. LVT in this context has not been considered as an additional form of local taxation, raising significantly more or less revenues than currently, or as a national concept.
Bangor University’s report provides an initial appraisal of a local LVT in Wales, identifying further work that would be required to fully test this approach. An important finding for future consideration is the investment necessary to meet the detailed information requirements on which such a tax could be based, including comprehensive cadastres of land and robust mechanisms for valuation.
I am pleased that within the scope of the research, Bangor University has been able to construct a preliminary statistical model to estimate a set of land values. Such detail has not been attempted before in the literature for Wales and it has enabled Bangor to determine potential tax rates, at which LVT would need to be levied to raise revenues broadly equal to the current systems of local taxation. However, a key lesson learned from the modelling work is that it is significantly more challenging to estimate land values for non-domestic uses than it is for domestic.
The report published today makes a contribution to our understanding of possible future reforms but much more work would be needed regarding the practical and policy implications of each idea. For example, whether various options could be designed in such a way to support wider policy objectives such as decarbonisation and tackling poverty, and crucially, how the link between local taxpayers and the local services they receive can be maintained.
This research is one strand of work within a broader programme of reforms to local taxation and the wider local government finance system. Read the progress update on the work programme I published on 5 November.