The essential requirements

American Journal of Economics and Sociology, The, Nov, 2005

ADOPTING ANNUAL LAND rental values as the primary source of public revenue requires acceptance of one fundamental pre-condition: namely, recognition that land is a finite resource provided by nature and therefore distinguishable from all man-made goods, structures and services. Plus an acknowledgement that individual persons who use or occupy this resource owe an obligation to the wider global community upon whom nature has bestowed it (which for practical administrative purposes means an obligation to nation-states or other recognised community groupings).

Given acceptance of this fundamental pre-condition, there are really only three basic institutional requirements:

* There must exist a public land planning and administration authority responsible for planning and determining the use of all land; and, at any given time, the permissible or intended use of all land must be indicated on publicly available cadastral planning maps and supporting documents.

* There must be a public register or record of all landholding.

* There must be a public land valuation authority--preferably separate from and independent of the land planning and public revenue agencies--capable of assessing and maintaining an up-to-date record of the annual rental value of all parcels of land.

While these are the essential requirements, certain additional desiderata should perhaps be recorded. Thus it would be desirable to explicitly acknowledge the right of all citizens (including corporate bodies) to enjoy the secure and exclusive occupation and use of land, subject to compliance with the town planning controls applicable to it and acceptance of an obligation to pay its assessed annual rental value to the community as represented by the government; and likewise to explicitly acknowledge the right of every lawful occupier of land to own, and profit from, improvements lawfully erected on the land, and be compensated in full for the value of any such improvements in the event of the land being required for a public purpose. (1)

It would be desirable to have in place simple, non-legalistic appeals systems to enable citizens to have land use decisions reconsidered and the official assessment of the annual rental value of their land reviewed and to resolve disputes about the market value of the improvements if their land is required for a public purpose.

It would further be desirable (as indicated in Chapter 6) to make express provision for the deferment of the rental obligation in cases of hardship, more particularly in circumstances where a planned upgrading of permissible land use results in a substantial increase in the assessed annual rent. And generally, along with the promulgation of civic rights and responsibilities, it would be desirable to promote greater public awareness and understanding of land planning and property valuation processes and procedures and their relationship to public revenue raising.

In most Western societies the essential institutional requirements already exist or can readily be established, but the fundamental conceptual recognition of the status of land is lacking. By contrast, in many developing societies and in communist or formerly communist societies the institutional mechanisms may presently be inadequate, whereas the fundamental conceptual pre-condition is (or up till now has been) acknowledged in some degree, either in tribal custom or in the state ownership of all land and property. Remedying their institutional shortcomings may be easier than persuading Western societies to recognise the special status of land.

Certainly, the maintenance of up-to-date valuations is critically important. This was not understood in Canberra. At the time of federation the framers of the Australian Constitution were keenly aware of the need to prevent land speculation. Thus section 125 provides that the territory for the seat of government "shall be vested in and belong to the Commonwealth." In the subsequent administration of early Canberra's leasehold tenure, however, it was decided that land rentals should be re-assessed only at 20-year intervals. When rentals were re-assessed after the rapid post-war growth of Canberra, the rental increases were so great that popular opposition caused the government misguidedly to abolish the land rental system. Landholders retained the benefit of huge increases in the value of their land, and the scope for Canberra to become substantially self-funding (like the early post-war English new towns) was lost.

Frequent re-valuations are necessary to ensure that rental values reflect changes in economic circumstances as well as community growth. Thus assessed annual rentals should rise correspondingly in economic booms, and be reduced promptly in conformity with economic decline (for example, in the advent of bad seasons, poor harvests, a decline in export prices or a decline in the tourist trade). Frequent re-valuations avoid public perception of unconscionably sudden and steep increases in assessed rentals.