A TAX applied directly to the value of land could help deliver Scotland’s land reform objectives and raise revenue in a more 'progressive' way, a new report has claimed – but rural industry bodies have urged caution over that conclusion.

Written for the Scottish Land Commission, the report argues that there is scope for reform of existing land and property taxation. With a total estimated value of around £5 trillion, or just over half of the total net worth of the UK, land is the most valuable asset in the country, leading some economists to question whether more needs to be done to ensure that the gains from rising land value benefit society as a whole.

SLC chief executive, Hamish Trench, said that the report provided a good evidence base for further discussion: "The research suggests land value tax could contribute to addressing key land reform objectives, including bringing vacant and derelict sites into use, reinvesting rising land values to public benefit and moving to a more diverse and productive pattern of land ownership.

“While the theoretical case for land value tax is strong, this research focused on international experience in implementing land value tax and it provides useful lessons on both the policy approach and practical issues that need to be considered. The SLC will now be engaging widely with stakeholders to undertake further analysis of role land value tax could play in delivering land reform priorities.”

Some stakeholders did not wait to be asked to say what they thought of the idea. Executive director at Scottish Land and Estates, Sarah-Jane Laing, immediately called for caution: “Land value tax has been debated for many years but has not been taken forward by any administration because of the potential impact it may have on not just rural Scotland, but the whole of the country.

“The introduction of land value tax would have an impact on every corner of Scotland, both rural and urban – so it should be recognised that this would not be solely a tax on land ownership," she said. "Rural businesses, which invest heavily across Scotland, are already subject to a very well established and complex tax regime and it should be pointed out that land value taxation is, in effect, already in existence in the form of capital gains tax, inheritance tax and developer contribution when planning permission is granted.

“We believe the impact of any policy change of this magnitude should not only be measured in terms of delivery of land reform objectives.”

Speaking from Johnston Carmichael, which operates NFU Scotland’s Tax Advice Helpline, Alexandra Docherty, also voiced caution: "Whilst the theoretical benefits to a land value tax are that it encourages land to be used more productively as the tax would be based on the value of the land in its optimum use as opposed to its actual use, the findings of the report is that there is a lack of practical evidence of these benefits amongst the countries considered as part of the study.

“There are a number of practical issues that need to be considered carefully by the Commission. Land is already exposed to numerous taxes, including capital gains tax on sale, inheritance tax on death as well as Scottish taxes on acquisition, such as land and buildings transaction tax," said Ms Docherty. "Complexity in this area is already burdensome on business and with the agricultural sector already facing significant change post Brexit, the timing of possible additional tax burdens should be considered carefully to ensure the sector is attractive to the next generation.”