russia corruption public housing singpaore

Public Housing Needs Honest Financing
hong kong land lease land rent rent dividend oecd property tax land value tax tax shift redevelopment

OECD to Northern Europe -- Shift Your Property Taxes

When the OECD makes a policy recommendation, it often gets adopted by member nations. That means, the world could become far better off quite soon -- cross your fingers. We trim, blend, and append four 2012 articles and one 2011 one from: (1) BBC, Feb 17, on Russia by D. Sandford; (2) BBC, Feb 16, on Singapore by R. Lim; (3) Asia Times, Oct 5, on Hong Kong by C. Cook (ex-director of the International Petroleum Exchange); (4) International Business Times, Feb 16, on the OECD by S. Smith; and (5) a cohort on a tax shift, Jan 31, by M. Curtis.

by Daniel Sandford, by Rebecca Lim, by Chris Cook, by Stephen Smith, and by Mike Curtis

Parts of Russia, including many of the big cities, have turned against Mr Putin's United Russia which opponents have nicknamed the "party of crooks and thieves". Novosibirsk, Russia's third-largest city, returned one of the lowest votes for United Russia in December's parliamentary elections. The ruling party was beaten into second place by the Communists in every district of the city.

As in many places in Russia, the big issue in Novosibirsk is corruption. Government grants the few surviving soldiers from the Patriotic War funds for new housing. But some local officials persuade soldiers to accept one-room flats, built out of bricks from a factory owned by the officials, worth half of the 5m rubles that soldiers are awarded.

Officials take whistle-blowers to the local police station and threaten them with loss of their jobs. Police also arrest citizens under false charges of dealing in drugs then request bribes for dismissal.

To see the whole article, click here .

JJS: Other places provide housing for the needy without so much corruption.

Low-income and needy people in Singapore can live in a one-room apartments - which average 30 sq.m and cost S$23 ($19, £12) to S$205 ($165, £104) a month to rent from the government depending on household income.

To see the whole article, click here .

JJS: Unlike Singapore which levies private land (and imposes other taxes), one place provides public housing by leasing public land.

Hong Kong gathers a large proportion of government income from the use value of land through the sale of long leases of public land, and reduced its taxation upon businesses and citizens. However, over the years the amount raised from the sale of long leaseholds has been reduced considerably -- to the advantage of developers.

The US Federal Reserve Bank responded to the credit crisis in 2008 by reducing interest rates to zero and by printing trillions of dollars. Both responses hurt Hong Kong. The low interest rates, a boon to borrowing speculators, have exacerbated property prices. And investors, by switching from depreciating dollars to commodities, perversely caused the very inflation they sought to avoid, making food and energy in Hong Kong costlier.

The government could charge a new ground rental on the unimproved value land. Having to pay this rental would reduce speculation. The Rental Pool could be distributed to citizens as a land dividend. This would be of a net fiscal transfer from those with above average exclusive use of Hong Kong's scarce land to those with below average use, the poorest citizens.

To see the whole article, click here .

JJS: Other experts -- very important ones -- think public recovery of land rent is a good idea.

The Organization for Economic Co-operation and Development is calling on Germany to raise its property taxes dramatically and reduce taxes on labor. The group, whose membership is made up of 34 of the world's leading market economies, also made similar recommendations for Denmark, Norway, and the UK over the past month.

For Germany, the organization recommended tripling its property taxes, while reducing its wage taxes and social security contributions, which currently make up 64% of total tax revenue, compared with the OECD average of 52%. Property taxes, meanwhile, amount to only 1% of total revenue collected, against an OECD average of 3%.

The OECD also advised Denmark to cut income taxes and increase property taxes and called on Norway to raise its property taxes and eliminate its mortgage interest deduction.

The International Monetary Fund also made a similar recommendation to Norway.

The OECD has been a strong proponent recently of land value taxes, which date back to Adam Smith but were most vigorously promoted by 19th century economist Henry George. He promoted a land value tax which is assessed on the unimproved value of underlying land, not penalizing intensive development like many property taxes today.

To see the whole article, click here .

JJS: The modern experts cited a venerable authority. Here’s more on his analysis.

Shifting all municipal taxes from buildings, wages, and sales to the rental value of land means taxes would be zero in the most distressed areas and proportional to the value of locations in all others. This shift would not only maintain public revenue but would also create an incentive for landowners to put each site to its highest and best use, for the tax would have to be paid whether the land was actually used or not.

The more intense land use would create more jobs and housing in the valuable areas than are currently present. Redevelopment would eventually radiate back into the distressed areas, and with increased population and economic activity, those areas would again become valuable and provide their fair share of the city revenue.

The greater economic activity and redevelopment also increases the rental and selling value of land as well, too.

JJS: And that higher land value makes public works -- such as housing for those outside the mainstream economy -- self-financing and makes the residential dividend feasible.


Editor Jeffery J. Smith runs the Forum on Geonomics and helped prepare a course for the UN on geonomics. To take the “Land Rights” course, click here .

Also see:

5 Ways GE Plays the Tax Game

As China, the US, etc confront corruption …

Hong Kong approaches land-value tax ideal

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