The case for a land tax

TWEET SHARE

Traditionally social justice was served by taking away from the rich to feed the poor. Mintoff once colourfully compared the role of the state to that of the sun which helps water evaporate from the sea (the rich) to form clouds (the welfare state) which rains on the grass which feeds the workers.

Surely most European countries owe free healthcare and education to this system.

One legitimate criticism of this system is that it tends to penalise those who have invested their productive energies to contribute towards economic growth.

Throughout the west centre right parties promising to slash income taxes are winning the battle for the hearts and minds. Parties of the left can ignore this at their own peril.

Yet this could come at the cost of a breakdown of public services which are equally in demand. It could also endanger investment in a green and renewable technologies as well as social mobility.

For contrary to what is claimed by conservatives, it also costs money to reform welfare, from providing sheer money to providing tools for advancement.

In Malta both major parties seem to have converged on the need to cut income tax.

Before the election the Nationalist Party had made a solemn pledge to slash the top rate of income tax for everyone earning less than €60,000 a year.

It is now facing a quandary. Surely the same government claiming that Malta is out of the recession cannot keep on telling us that it can’t cut taxes because we are facing a recession.

The Labour Party has politically seized the moment calling on the government to honour its pledge to cut income tax without entering the merits of how this shortfall in income will be made up for. Muscat did hint to the need of a shift in the tax system in my latest interview with him but that needs further explanation.

Surely the state would collect more VAT if people spent more instead of paying taxes, but it is doubtful whether that would be enough to make up for the shortfall.

Yet there is a third way between ‘tax and spend’ and the ‘tax less and spend less’ models…. it is the argument that taxes should be shifted from work towards pollution and speculation.

And if we go in that direction, the first thing that comes to my mind which should be taxed, it is land, especially land which is left vacant for speculation.

The land tax could also include a mansion tax on huge estates.

The land tax should be part of a package which on one hand reduces income tax while targeting other forms of unearned income, like the super-profits enjoyed by banks and privatised monopolies and the returns accruing to the already wealthy through speculative investments.

A carbon tax could be another welcome option which should be considered. But that needs a lot of thinking and public consultation to ensure that it does not end being socially regressive. Lets start discussing it now but in a transparent and open way.

Taxes on speculation (and pollution) should be adopted as an alternative, not an additional, means of raising public revenue. The ultimate goal should be to free a large chunk of the middle class from the income tax system.

James Debono is MaltaToday's chief reporter on environment, planning and land use issues, ...

More from James Debono

Samir Shukla •

Dear James, I misunderstood the land tax. I thought that vacant land was not be taxed and not vacant property. I understand that a vacant land (plot) is better than having a vacant building or block of flats. As for the mansion tax vis a vie the use of resource remember that many new dwellings do not have outside space or privacy. This is a detriment to our standard of living, to our children and other factors. I have a terraced house and now I am squashed between apartments. Now I have to switch on the light in the morning because all the gardens surrounding me were built up. Is this a better use of resource or more profit for the speculator? Now the latest trend is pulling down fantastic fully detached villas to fit in two or three semi detached units (agents call them villas). I do not afford to buy such a house but I like seeing them and they are reflect a certain standard of living. High Ridge is a case in point. there are some fantastic houses and now they are being pulled down to fit more units. Shame, even with regards to our country's image. Tourists pass from there every day. Miost of them probably think we live in boathouses.

Peter Cassar •

A Tax on vacant land would have a positive impact in the sense of encouraging owners to rent and use empty properties. A mansion tax like that proposed by the lib dems in the UK makes even more sense in a small country like malta where land is scarce. It is a tax on the use of a resource. As regards robin hood...what am saying is not robbing from rich to feed the poor (although fiarness always demands that taxes hit most those who can afford to) but using taxes as a way of encouraging environmentally friendly choices as well as encouraging the Maltese to invest in other things apart from land and speculation.

Samir Shukla •

It is a fact that certain people prefer to stay at home and live on social security rather than go out for work and earn a min. wage. As times go by it seems that businessmen shall start using the same concept. The term businessman has always bought misconceptions with certain people and also past govenrments. For them business means wealth, money, cars, villas, abused employees and perhaps a yacht. This is not the case. The guy selling newspapers at the corner shop is also a businessman who works twelve hours a day and six (possbibly seven) days a week. Probabilities are has years of profit money piled up in stock some of which is unsaleable. Another portion of these are bad debts. This is a low standard of living. On the other hand I cannot understand why a person who has worked hard to buy a piece of land or perhaps a villa, should pay some 'mansion tax'. I mean he paid his taxes, all stamp duties and eventually capital gains when he sells. So why make him pay more? If he has a villa he will certainly spend more in maintenence then I do in a flat. I agree with the PPP concept. I agree health service should NOT be free for EVERYONE - only for those in need. I also agree they should be fairly priced below commercial tariffs. However I cannot understand the 'Robin Hood' concept.

Peter Cassar •

My argument was not for more taxes but for a shift in our tax system from one which penalizes incomes and productive investments to one which penalises speculation especially land speculation. This is because I believe in fiscal fairness and taxation is the primary instrument governments have to ensure this. Land (apart from water) is the scarcest resource in Malta and both should be valued. Even the liberal conservatives in the UK have increased capital gains tax as a way to start to implement the lib dem promise to cut income tax for the less well off. I concur that there is waste in government that can be cut. I also agree that we are paying an indirect tax for incompetence and conflicts of interests. I doubt that this alone would balance the books, but my argument for a shift in taxation is not aimed at increasing government revenues to make up for inefficiencies but to make the fiscal system fairer and more stimulating for normal people who work and contribute to the economy not by speculating on land but by working.

•

There is no need for more taxes. Stop paying the EU because it is costing us more than what we are getting, reduce all the fantastic salaries such as the LM125 INCREASE PER WEEK which the Prime Minister awarded to himself, his Ministers and Parliamentary Secretaries, scrap all those authorities that were set up to provide jobs for the blue-eyed-boys-and gals like MEPA, ADT, MCA and the rest and we will have a surplus. This is what needs to be done and not more taxes.

Alfred Galea •

Cutting taxes AND cutting government spending....there's a lot of "fat" to be cut without affecting social services.

•

ehmmm yes that is written on papers- all know what have been said and writted before the last election-Our Hon. Prime minister now is saying that he did not said that-well another treasure we have here..........