Tax on Land and Property
Land and property taxes have the potential to help achieve long term outcomes for land reform, such as diversification of land ownership, town centre regeneration, a just transition to net zero and supporting active farming.
The Scottish Land Commission has made recommendations on changes to existing land and property taxation to support Scotland’s economic recovery and land reform objectives. Land is our most valuable asset and Scotland has scope to tax land in ways that better support the Scottish Government’s policy priorities, but this needs to be considered in a careful way that acknowledges the complexity and devolved powers.
The recommendations make the case for ongoing reform to improve the way in which Scotland taxes land, outlining the steps needed to increase the role of land values in the nation’s tax base and support the delivery of the Scottish Government’s land policies.
Our report was informed by the views of an expert advisory group, and makes recommendations on practical steps that Scottish Government could take to improve the way in which land value is taxed. The recommendations have the potential to create a more productive and diverse pattern of land use and ownership and include:
- Bringing all land onto the valuation roll and create a one stop shop approach to information on land ownership, use and value.
- Consider the potential of Land and Buildings Transaction Tax in shaping the land market in a just transition and the role of taxation in achieving the right balance of public and private benefit from future carbon values.
- Add additional reliefs on non-domestic rates (NDR) and council tax for newly built properties on long-standing vacant sites to incentivise reuse and introduce a new power for local authorities to apply NDR to newly derelict properties to discourage them from being allowed to fall into disrepair.
- Scottish Government work with the UK Government to explore a more progressive approach to the use of tax reliefs and exemptions in relation to land that would support diversification of ownership and the potential for an income tax relief to support the letting of agricultural land.
- Reforms to increasing the role of land values in the tax system need to have a strong level of public understanding and consensus.
The report sets out steps that can be taken to steadily increase the role that land value plays in taxation, as well as specific reform opportunities to tackle priorities including derelict land regeneration and a just transition.
The report makes the case for ongoing reform and improving the way in which Scotland taxes land, rather than introducing sweeping reforms for a single land value tax. In 2018 we looked at the international experience of land value taxation and found that there are strong theoretical benefits of land value taxation which make a robust case for considering reform in this area and improving the current system of land taxation in Scotland. However, there are significant practical challenges. We are recommending that land values can and should be taxed more effectively through a range of tax instruments, planned over time, so that land becomes a more significant part of the tax base.