Site value tax or site sales profit tax?
We’re awaiting this morning the Programme for Government, which will be some sort of compromise between the manifesto of Fine Gael and Labour. Given the ratio of seats of 76 to 37 (2.05:1), the balance will be in Fine Gael’s favour, but there are elements of Labour’s manifesto I like, and not just on social issues. In their section on taxation, Labour write, “Labour accepts that it will be necessary to introduce a site value charge, in order to prevent higher taxes on work”. Fine Gael have instead proposed a “site sale profits tax”, levied on the profit made from the site value on the sale of a residence. As a reliable and sustainable form of taxation, I find a site value tax most attractive, possibly the least worst form of any taxation, and it is possibly too the only economic measure proposed by Labour I would certainly endorse. But I only fully appreciated the problems with own proposal last Thursday, as I was doing a last-minute flyer drop off Leeson St the day before the election. I met an elderly couple who felt it wrong that they would particularly be hit because they wished to trade down on their retirement.
A site value or land value tax is economically attractive because it does not disincentivize further investment in one’s property. And other than occasional changes to the amount because of improvements in amenities like a new Luas line, it is a fairly steady source of revenue. A transaction tax, whether it be stamp duty or sales profit tax, would be dependent on vagaries of the market.
Labour did, however, acknowledge that because there would need to be a preliminary survey of property, it couldn’t be introduced till 2014. There should also be relief for those who have recently paid high levels of stamp duty. If we do get a pledge on such a tax in the Programme, and if that’s the timescale we get, I will be pleased, particularly so if over time more is raised through a land tax and progressively less through taxing income.