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Finally, a sensible complaint about business rates

Summary:
It really does seem to take time for good economics to sink into the collective consciousness. Henry George was making this point a century and a half ago:The industry groups – representing all sectors of the UK economy from airports to pubs, shops, construction and manufacturing – said the current system served as a tax on investment and could hold back firms from spending on green projects and boosting their operations outside London and large cities.Their statement urged the chancellor to announce a cut in business rates alongside other reforms to lower the burden on firms, including removing disincentives for green investment.Under the current system, a company investing in its physical premises by installing solar panels or heat pumps could add to the value of the building, raising

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It really does seem to take time for good economics to sink into the collective consciousness. Henry George was making this point a century and a half ago:

The industry groups – representing all sectors of the UK economy from airports to pubs, shops, construction and manufacturing – said the current system served as a tax on investment and could hold back firms from spending on green projects and boosting their operations outside London and large cities.

Their statement urged the chancellor to announce a cut in business rates alongside other reforms to lower the burden on firms, including removing disincentives for green investment.

Under the current system, a company investing in its physical premises by installing solar panels or heat pumps could add to the value of the building, raising its rateable value and therefore the firm’s tax burden.

This is entirely unlike the landlord whining that we complained of a couple of days back.

The value of a building depends upon two things. What the building is, what’s been added to it - this is investment. Then where the building is, the plot of land it occupies - that’s land value. We actively desire to tax that land value whatever the landlords have to say about it. And we don’t want to tax the investments because investment is what makes society richer.

The correct reform to business rates is therefore clear. Make it a land value tax and be done with it.

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Tim Worstall
Tim Worstall is a British-born writer and Senior Fellow of the Adam Smith Institute. Worstall is a regular contributor to Forbes and the Register. He has also written for the Guardian, the New York Times, PandoDaily, the Daily Telegraph blogs, the Times, and The Wall Street Journal. In 2010 his blog was listed as one of the top 100 UK political blogs by Total Politics.

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