Land Value Taxation and the Valuation of Land in Australia

Abstract

Land value tax is an important source of revenue for government internationally and particularly in industrialised OECD countries in which this tax operates on a number of different bases of value. Over the past 30 years a number of trends in tax policy have impacted revenue from this tax and how the tax is assessed. This paper examines land value taxation and speci cally the valuation of land processes used to determine the base of this tax in Australia. The paper examines the challenges of valuing land in highly urbanised locations where land rarely transacts in isolation of improvements. It further examines the practices and processes used in the valuation of land speci cally for taxation purposes. Simulations have been developed to examine how land value is determined from improved property transactions and to identify the issues which confront and impact the valuation process and the integrity of this tax. The paper makes its contribution by examining how valuers determine the value of land in highly urbanised locations in the absence of vacant land sales. This contributes to de ning how this process may be improved through increased transparency in the valuation process. This is done while maintaining the ef ciency of land as a neutral base for the assessment of land tax as opposed to moving to alternate bases of value. The paper examines the challenges in valuing land in highly urbanised locations where land rarely transacts in isolation of improvements. Simulations are used to examine how land value is determined from improved property transactions and identifies the issues which confront and impact the valuation process and integrity of this tax. Among the factors which determine market value, the paper makes an important contribution by identifying that the highest and best use of land is an important factor in establishing a neutral and efficient base on which to assess a tax on land in highly urbanised locations.