Monday, March 4, 2013

Cool the reactor or face the fallout

Leading economies must shakeup tax regimes to combat next recession

OECD argues that western economies that rely on income and transaction taxes must switch to wealth and consumption taxes.

Posted by dill @ 08:21 AM (1439 views)
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6 thoughts on “Cool the reactor or face the fallout

  • Another well-argued case for Land Value Tax, this time from OECD.

    I particularly liked this bit: “The west has wealth and not income, at least not in the way it once did, so it makes sense for governments to make the switch. Not to a jewellery tax, which Vince Cable dismissed last week, but to a tax on land that encourages building and discourages speculative hoarding. At current rates of building, Britain’s largest housebuilders are sitting on around four years of land with planning permission, waiting for the most profitable moment to build.

    “Property is an obsession in the UK and the disease has spread to many parts of continental Europe. Land taxes, combined with lower income taxes, offer the prospect of a cure.”

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  • mark wadsworth says:

    Philip Inman is top man.

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  • Stuart – much as I love the idea of LVT , the sentence you highlighted is, to me, the crux of the issue… The west has wealth and not income, so it makes absolutely no sense for governments to make the switch because they’ll get voted out. It might make sense to you and me, but it’s political suicide.

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  • Timmy, yes, politics is a big hurdle. But a lot of the ‘wealth’ is realisable at the right price. For example, poor widow sitting on eight-bedroom mansion, could sell it and buy somewhere smaller or take up the option of equity release; poor widow sitting on three-bed semi with £200,000 shares portfolio could do likewise.

    I think only selfish offspring would want her to keep all her assets and live in poverty, while they long for the day they’ll inherit, hoping she’s gone down the route of inheritance tax avoidance to the best of her accountant’s/financial adviser’s abilities.

    As for companies sitting on land banks with planning permission, if you make it unattractive financially for them to do so, they will either get on with building to make some return or sell up to someone who will. They may take a hit… but that’s the gamble they took.

    It’s a boil that needs lancing and until it is we’ll see no stability… something, I think, that the OECD is arguing.

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  • Stuart – completely agree with all your points. Would love to see a tax system which encourages desirable behaviours more effectively. The current system disincentivises earning and spending but encourages houses that nobody can afford – mental!

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  • Know this is your favourite LVT, but the first 2/3 of the article is crap. Just over optimistic economic predictions which will be very wide of the mark like they always are.

    Nothing has been solved. just a matter of how long they can kick the can.

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