Land: Site Value Taxation
How the 3% Site Value Tax works — and why it is the cornerstone of Common Dividend.
Why Land is Different
Land is unlike other forms of capital. You can create a factory, write software, grow crops. But no one created the land — and no one can create more of it in a desirable location. The value of a plot in Makati’s CBD is not the result of anything the landowner did. It reflects:
- Proximity to jobs, customers, and services built by millions of workers.
- Infrastructure funded by taxpayers: roads, MRT lines, water systems, utilities.
- Community investment: schools, hospitals, commercial activity developed over generations.
This “location premium” — the site value — is created by the community. Under current law, it is captured by private landowners through rising rents and capital gains.
A Site Value Tax reclaims this collectively-created value for the collective benefit.
How the Tax Works
A Site Value Tax (SVT) is levied on the assessed value of land excluding improvements (buildings, infrastructure on the lot). Key features:
- 3% annual rate on the assessed site value of all Philippine land.
- Location-based: a vacant lot in BGC pays the same rate as a lot with a skyscraper — but the base value differs.
- Improvements exempt: no penalty for building, improving, or making land productive.
- Replaces existing real property tax regimes and eventually income taxes.
Estimated Revenue
| Land Category | Estimated Total Value | 3% Annual Tax |
|---|---|---|
| Urban commercial (NCR, Cebu, Davao) | ₱25 Trillion | ₱750 Billion |
| Residential (urban and peri-urban) | ₱20 Trillion | ₱600 Billion |
| Agricultural | ₱10 Trillion | ₱300 Billion |
| Industrial / special use | ₱10 Trillion | ₱300 Billion |
| Total | ₱65 Trillion | ₱1.95 Trillion |
At 6.5% of GDP, land value tax would be the single largest revenue source in the Philippine tax system.
Why This Works: The Georgist Logic
Henry George’s insight (1879): because land value is community-created, taxing it does not reduce incentive to produce. Unlike an income tax (which discourages work) or a VAT (which discourages consumption), a land value tax:
- Cannot be passed on to tenants through higher rents (the tax is on the land’s inherent value, not the improvement).
- Discourages speculation — holding vacant lots in prime locations becomes expensive, pushing land into productive use.
- Reduces housing costs — land speculation is a primary driver of housing unaffordability in Metro Manila.
- Encourages development — no penalty for building more on your lot; the tax is the same whether you leave it vacant or put up a 40-story building.
Philippine Context
The Problem Today
- The top 1% of Filipino families own an estimated 40% of the country’s wealth, much of it in real property.
- Vacant lots and underutilized land in Metro Manila drive up housing costs for workers who must commute further.
- The Comprehensive Agrarian Reform Program has stalled; landlessness persists in agricultural regions.
- The current real property tax (RPT) averages only 1–2% of assessed value, and assessed values are typically far below market rates.
The Solution
Raise the effective Site Value Tax to 3% of market site value. Reform the assessment system to use transparent, annually-updated market valuations (the Bureau of Local Government Finance already has this mandate; enforcement is the gap).
Who Benefits
- Landless families (majority of Filipinos): net beneficiaries — receive full dividend, pay no LVT.
- Small homeowners: net beneficiaries — dividend income + tax relief > LVT on a modest residential lot.
- Subsistence farmers: LVT on low-value agricultural land is minimal; dividend provides meaningful income floor.
- Large urban landholders: net contributors — pay LVT proportional to the location value they extract from the community.
Objections
“This will destroy property values.”
It will reduce the speculative premium in land prices — which is the goal. The productive value of land (for housing, farming, business) remains. Comparable regimes in Singapore, Estonia, and Taiwan have not caused property market collapses.
“Poor farmers will lose their land.”
Agricultural land values are low; LVT on a 1-hectare rice farm in Nueva Ecija at ₱500/sqm site value = ₱150,000/year. This is offset by the dividend (~₱27,272/person, so a family of 5 receives ₱136,360) plus complete income tax elimination. Net benefit is positive.
“Assessment is too hard.”
The Philippines already has a land registration system (LRA) and a Bureau of Local Government Finance with assessment mandates. The challenge is updating assessed values to market rates — a political problem, not a technical one. Open-source GIS tools and mass appraisal methods can reduce cost dramatically.