RICs criticises government land tax

Ramesh Sharma

March 4, 2006

RICS reports the government has based the tax on a fundamental misunderstanding of how the property market operates,

The Planning Gain Supplement (PGS) would be paid by developers as a portion of the uplift in land value attained when planning permission is granted. But RICS say collecting the money centrally under the new PGS proposals is fraught with problems. Waiting for government to pay out for infrastructure work that may be essential for development to begin or proceed brings unnecessary uncertainty and risk to projects that could discourage development.

The money is intended to fund local infrastructure projects to accompany large developments. RICS and other industry bodies have lobbied that a tariff-based system would be far more workable and efficient. However, the government looks set on PGS.

RICS spokesman Brian Berry said: “Originally the government saw this working like the National Lottery with money coming in centrally and dished out to worthy causes – places where infrastructure would be most beneficial. But it may rethink now it has realised many schemes depend on an amount of infrastructure being in place before work can start. Providing this centrally would mean government acting as a kind of construction financier – the stuff of nightmares for it and developers.

“Also, there’s a lack of understanding on how land is valued. The government must avoid an adversarial system where local authorities and developers are locked in combat over the notional value brought by planning permission. This would act as a disincentive for development and an obstacle to the greater level of house building so urgently needed to increase affordability.”

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