It’s the most wonderful time of the year, and as an early Christmas present, the Scottish Land Commission have published their report on “Land and property taxation in Scotland: Initial scoping of options for reform”.
The Scottish Land Commission (“SLC”), which was established under the Land Reform (Scotland) Act 2016 is tasked with driving a programme of land reform spanning both urban and rural land, to create a Scotland where land is owned and used in ways that are fair, responsible and productive.
Publication also coincided with the launch of the newly formed Expert Advisory Group on Tax on Land and Property, which will advise SLC and shape the recommendations that they will put to the Scottish Government late next year.
The report identifies a range of ways in which taxes could be reformed and utilised in order to achieve long term outcomes for Scotland – tackling inequality, expanding the supply of land for housing and reducing the amount of vacant and derelict land. These are all encompassed in the Scottish Government’s overarching goal of inclusive economic growth, a very important issue at the best of times. However given the disproportionate impact of the pandemic on the most deprived areas of Scotland, this has become even more pressing.
The Report suggests that by utilising well designed tax instruments, the Scottish Government could stimulate economic recovery within Scotland.
Some taxes, including council tax, non-domestic rates and Land and Buildings Transaction Tax (LBTT), are already the responsibility of Scottish Parliament. The Report also illustrates an option to introduce new local taxes to fund local authority expenditure.
There are also other options in connection with the either reserved or partially devolved taxes, which have an impact on land use (corporation tax, inheritance tax and income tax) but these would require involvement from Westminster.
There are reported figures to evidence why this would make a difference – it is estimated that 50% of the UK’s wealth is tied up in land and property. However it only forms around 10% of the total tax base. In Scotland, just 12% of all public sector revenue across reserved and devolved taxes are raised through taxes levied on land and property.
Lorne MacLeod, Commissioner and Chair of the Commission’s newly established tax expert advisory group said,
“Land is our most valuable asset and we need to be willing to rethink how our tax system operates to make sure we are making the most of it for everyone.
“Taxes on land, and transactions involving land, are widely used around the world to raise revenues, reduce inequality and promote more effective land use and management.
“Taxes on land and property have the potential to stimulate behaviour change to incentivise a more productive use of land as well as disincentivising behaviour relating to land use and ownership that is not delivering wider public benefits.
“They also provide an important source of revenue to finance public services and infrastructure. Scotland will have to ensure best possible use of its resources, including land, to support the recovery.”
The report has not been universally welcomed. NFU Scotland president Andrew McCornick said the report’s focus on land ownership rather than land use was worrying.
“Those who are actively working the land to produce food should not have anything to fear from political agendas relating to scale or concentration of land ownership,”
“The system of reliefs that are in place, like Agricultural Property Relief, currently ensure that family farms can be passed on in families. These ensure continuity and effective business planning and must continue.
“Our view remains that a land tax is entirely unacceptable and this blunt tool would jeopardise the sustainability of businesses and the ability of industry to meet food and drink targets.”
There is no question that Scotland’s recovery and post pandemic are essential. However we will have to wait till late 2021 before it is clear whether concerns of landowners will be alleviated in the process.