Written evidence submitted by Roger Pauli

The structure of our economy is now firmly post-industrial and the UK tax code has become excessively complex. The substantial impacts the pandemic has had on families, businesses and public finances and the structural weaknesses it has revealed makes the case for reform even more urgent.

Parliament and the Government have the opportunity to bring about lasting change as we recover from the impacts of the pandemic. We are pleased to see the broad scope of this inquiry, with land taxes firmly in its remit, and also HM Treasury launching a fundamental review of business rates, the scope of which has become even more urgent with rates suspended for many businesses as part of the COVID-19 relief package.

I hope to bring to the discussion my perspective as a long-time participant in British industry, commerce and agriculture. Throughout my career I have been acutely aware of how taxation shapes and distorts the decisions of businesses. For example:

Finally, I have historically benefited from the granting of planning consents for change of use from agriculture to residential or commercial development. However, I have come to see a great unfairness in a system that rewards landowners with windfall profits whilst failing to provide local government with the resources to service developments and hitting ordinary families with greatly inflated housing costs.

Informed by these experiences, I propose that in order to simplify the tax code, encourage enterprise and enable the Government’s “levelling-up” agenda, we should replace many existing taxes with taxes on three broad categories of assets and activities: 


A simplified tax code aims to:


Some of these proposals to reform our tax system and revive our economy may require countervailing measures to maximise their potential impact and mitigate undesirable side effects. More study is needed to establish what these measures might be, but it is likely they include staged transitions, reform of the banking sector and a link between government borrowing and tax-free pension provision. These are – quite deliberately – ambitious proposals, intended to stimulate discussion

In collaboration with WPI Economics, I have begun this work by exploring land value taxes and a proposed land usage supplement. The attached briefing (that has not previously been published) reviews how the current taxation system contributes to major problems in our economy and proposes:

  1. A simple land value tax, and,
  2. A land usage supplement to reward the beneficial use of land.

We believe these reforms can make a major contribution to creating a fairer and more productive UK economy. As its starting point, the paper takes the challenges and opportunities created not only by COVID-19, but also the changes that will be possible as a result of leaving the European Union and the questions the Government must answer as part of its levelling-up programme.  We have presented an outline for ambitious taxation reform and the benefits this could bring, as an inspiration for debate and further development. This is not a complete policy prescription as we want others to consider the questions and ideas we highlight.

Appended to this letter is a summary of the paper WPI Economics and I have written, and the full version is included as an annex for your consideration. We have formulated these proposals with the intention of making the use of land in the UK more efficient, equitable and desirable and removing a degree of speculation. These goals fit firmly within the frame of reference for the committee’s inquiry and we wish the members well in their endeavours, hoping that our evidence helps them consider this complicated and vital issue.


Summary of briefing paper

Reforming land taxation in post-Covid Britain: Why now is the right time to introduce a land value tax and a land usage supplement to revive the country

The problems with land use in Britain limit the potential of the economy and make many people, particularly the poor, worse off. These issues have developed and been compounded over time. They have been particularly exposed by current conditions – especially COVID-19 – but thankfully these circumstances contain within them the impetus and momentum for change.

We propose there are four categories of issues with how the tax system interacts with land use in the UK:

The opportunity has arisen to make a once in a generation change to tackle these challenges.

We propose a three-part solution to the problems we raise:

Scrapping existing inefficient taxes

We have identified a variety of taxes related to land/property use that are currently inequitable and/or economically distortive. The core taxes we propose replacing (with the revenue they generated in 2019/20[iii]) are:

In the report, we go into some detail about the problems of these taxes, including the distorting effect that Business Rates have on British businesses and the stagnation in the property market encouraged by Stamp Duty. Repealing these taxes is likely to have an outsized positive impact on the economy compared to the amount of revenue they generate

Additionally, we think there may be a case for replacing the following taxes because they are politically unpopular, raise relatively little money and have complicated structures allowing for substantial tax minimisation schemes that reduce people’s liabilities:

Replacing these taxes, or at least the part of them that related to property, is likely to help foster public support for tax reform as well as engendering a sense of greater fairness by making the taxes more transparent and more broadly applicable.

Replacing them with a Land Value Tax

The taxes we propose repealing are highly inefficient, meaning that replacing them with any tax that is more efficient would improve the taxation system and strengthen the economy. We propose doing so with an annual Land Value Tax that is paid at a set proportion of the value of a piece of land separate from any structures built upon it.

There are a range of well-rehearsed arguments on why Land Value Taxes are one of the most efficient possible taxes because of the fixed supply of land. We also consider several other advantages of such a system:

The report explores what the rate of a Land Value Tax would need to be to replace various revenues. We have constructed a range of indicative high-level Land Value Tax rates by comparing the value of all land in the UK with the revenue generated by the taxes we propose replacing. The value all land is £5.9 trillion[iv]. Depending on the taxes we wish to replace, this implies a Land Value Tax rate of between 1.3% and 1.6%. Table 1 details what rate would be required to replace various combinations of taxes

Table 1: Land Value Taxes required to replace selected existing taxes and combinations of taxes

Tax replaces

Revenue (2018/19)

LVT rate for revenue neutrality

Council Tax



Business Rates



Stamp Duty Land Tax



Capital Gains Tax



Inheritance Tax



Core proposal (Council Tax, Business rates and Stamp Duty Land Tax)



Broad proposal (Core plus Capital Gains Tax and Inheritance Tax)



Source: WPI Analysis of UK National Balance Sheet (ONS) and Government Revenue Data (ONS)

We have explored what the respective rates would be if there were different values for residential versus commercial land and find that:

This difference is driven by both the relative value of residential and commercial land and the current tax structure.

Although there a number of areas that require further thought, a Land Value Tax appears practical to implement. The basic mechanisms to value land either already exist or could be introduced without overwhelming difficulty. There are also political questions about how the incidence of a Land Value Tax will fall on households who have high property wealth compare to their income, such as some pensioners. There should be a limited system of some exceptions and deferments until death and/or sale of the property.

Land usage supplement

Additionally, we raise the proposal of a Land Usage Supplement to tax or subsidise the users of land depending on how beneficial the activity they conduct upon the land is. We propose this is a way of improving how land is used by directly paying or charging land users for their positive and negative externalities.

For the Land Usage Supplement to be effective, charges should be made and subsidies paid to the people actually using the land – the occupiers – rather than the owners. National and local authorities would set the positive and negative rates based on an assessment of the true economic cost or benefits of the activities.

Here is a preliminary list of activities which could have a land usage supplement applied to:

Such a land usage supplement will have the additional benefit of replacing several existing programmes, including the proposed new form of agricultural support after the end of the Common Agricultural Policy and business rates relief.


August 2020



[i] The effect of taxes and benefits on UK inequality, Institute for Fiscal Studies (2019), page 10. Available at: https://www.ifs.org.uk/uploads/BN249.pdf

[ii] WPI analysis of Centre for Progressive Capitalism (2017) ‘Estimating land value capture for England – updated analysis’

[iii] WPI Economics calculations based on ONS, Public sector current receipts: Appendix D, 21 July 2020. Available at: https://www.ons.gov.uk/economy/governmentpublicsectorandtaxes/publicsectorfinance/datasets/appendixdpublicsectorcurrentreceipts

[iv] ONS, The UK national balance sheet estimates, 28 November 2019. Available at: https://www.ons.gov.uk/economy/nationalaccounts/uksectoraccounts/datasets/thenationalbalancesheetestimates