A LVT only encourages the development of vacant or under-developed land in cases where land can be viably developed. Where land cannot be viably developed, there is no value to be gained from a LVT.

"Economic theory suggests that a land value tax based on highest and best use (HABU) would encourage the development of vacant or under- developed land because of the increased holding cost, thereby creating an incentive to sell the land or develop it. However, this only works in cases where land can be viably developed. Where land is economically not viable to develop, it follows that there is no value on which to levy a land value tax. Such land may require subsidy rather than taxation (Hughes et al., 2018). In the six countries reviewed, there was no firm evidence that LVT was a consistently effective tool for bringing land forward for development. Instead of taxation, more direct forms of regulatory control such as land use planning, development control and infrastructure investment are likely to be more effective."

empirical


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