Landowners face tax on vacant plots in Welsh Government plan
Landowners with empty plots they are not using will have to pay a vacant land tax under Welsh Government plans.
It would apply to land where permission to build has been granted – or land that is within a local development plan – but where no work has been carried out.
Critics accuse some businesses of “land banking” – hoarding land until it increases in value before building.
But house builders have raised concerns about the proposed tax.
The tax is one of four being considered by the Welsh Government under new powers.
Ministers say it will be an incentive for companies to build and stop empty sites from becoming derelict.
They are unable to say how much the tax would raise, and officials say it is unlikely to make a big contribution to the budget. They cite the example of the Republic of Ireland, where the tax taken is enough to cover the cost of collection.
Finance Secretary Mark Drakeford said: “A tax on vacant land could prevent the practice of land banking and land not being developed within the expected timescales.
“It’s aimed at those pieces of land where there are permissions already to build houses, for example, or where land has been identified in local development plans for that purpose and where nothing is happening.
“That’s not good enough because we need that land for very important policy purposes in Wales.”
The minister said it was not about raising money but changing behaviour, adding that the government would not introduce legislation if it would end up costing more money than it raised.
However, Mr Drakeford said a recent sample survey of land set aside for development showed no progress had been made in 25% of cases and that the tax would never be intended to capture people who “are making every effort to carry out the development they have committed to doing”.
He pointed to the initiative in the Republic of Ireland, which levies vacant sites, as a possible model.
The levy, which came into force in January, allows local authorities in Ireland to charge 3% of the market value of vacant sites not developed in 2018, with the rate rising to 7% in 2019.
Mr Drakeford said the Irish example and the “relatively narrow focus” of the tax made it the “most suitable” of the four shortlisted ideas to test Wales’ ability to introduce new taxes.
Under powers granted by the 2014 Wales Act, proposals for new taxes will have to be approved by the UK government and Parliament at Westminster.
Mr Drakeford will explain the next steps in the process in a statement to AMs on Tuesday.
When the idea was first raised in October, the House Builders Federation claimed such a tax could undermine a Welsh Government plan to build 20,000 affordable homes by making Wales less attractive to major builders than England.
Ifan Glyn, from the Federation of Master Builders Cymru, told BBC Radio Wales there were a variety of reasons why development of land did not happen or stalled.
He cited inadequate planning, skill shortages in construction, a shortage of materials and difficult relationships with utility companies.
“If there’s a tax that’s introduced that can focus solely on land banking for financial reasons to maximise profits, we would absolutely agree with that,” he said.
“Our issue is we don’t see how this tax can differentiate between land that’s been banked for financial reasons and land that isn’t being developed or stalling for reasons outside the developer’s control.”
Work will continue to develop the three other tax ideas on the shortlist – a levy to fund social care, a tax on disposable plastics and a tourism tax.
The Conservatives have called for the idea of a tourism tax – which would be paid on holiday accommodation – to be scrapped.
Plaid Cymru’s Rhun ap Iorwerth said it was to early to say whether there was value to the proposed land tax and a tax on disposable plastics was his party’s preferred option.
He said Plaid was “not against or in favour” of the land tax.
Welsh Government sources said it hoped to work with the UK government on a plastics tax.
From April 2019, ministers will also be able to vary income tax, cutting or raising rates by up to 10p in the pound within each tax band.
However, First Minister Carwyn Jones has made it clear the Welsh Government has no intention to change income tax rates before the election in 2021.