People may be aware that the Lib Dems' Tax and Economic Reform group ALTER have been campaigning against the Kate Barker proposal for taxing the gains made on grant of planning permission, which is likely to be brought forward in this year's Finance Bill alongside the Labour Land Campaign. Though we recently discovered that despite their new found enthusiasm for real Land Value Tax, the influential (amongst Labour types anyway) IPPR think tank was supporting it.

So on the Adam Smith Institute Blog today they come out against it, sensibly, though of course from the perspective of the property development industry who largely don't like the idea of any tax on anything they might see as gain for them:

Development Tax Disaster?

By Mischa Balen in: Development •

At the ASI we have promoted the use of simple and efficient tax systems, so it is with some interest that we have watched the messy new development land tax proposed by the Treasury. Jenny Davey in the Times draws attention to the tax and the opposition it has encountered from the British Property Federation.

The tax will be levied on the rise in price on land for which planning permission has been granted. But the British Property Federation reckons that it could create unnecessary delay in the planning process, as well as reallocating profits from the process to national rather than local projects, and, in addition, could cause '"messy legal disputes" over the process in which the tax is calculated. This is always the result with nebulous calculations: it can be very tricky in a rising market to calculate any increase in land value as a result of development.

But there is one overarching problem which we can foresee with this tax: by increasing taxes on development without a commitment to spend such revenues locally, the government is making it less likely that planning permission will be granted for much needed housing and shops in local communities. At a time when the government is pledging to restore local community government and accountability, it seems strange that this tax should remove "the link between the developer, the development and direct community benefit."

Of course, they do not support, as the economic guru they are named for did, proper, simple, land value tax. But hopefully this will be persuade the Tories (who at least at local government level have come out against PGS) and spell the end for this ill thought out tax on development.