The recommendation is among a number set out in a new report from the Scottish Land Commission (SLC), which has been tasked with identifying how changes to existing land and property taxation could support Scotland’s economic recovery and land reform objectives.
Other measures include offering incentives that would encourage derelict land in towns and cities to be used to build new housing and offering tax relief for landowners who rent out farmland to encourage active food production.
The report identifies changes that could help regenerate urban centres, ensure a fair move to a greener society, increase benefits for local communities and help create a more varied and transparent pattern of land ownership.
Around half of the UK’s wealth is tied up in land and property, but it only forms around 10 per cent of the total tax base.
In Scotland, just 12 per cent of all public sector revenue across reserved and devolved taxes are raised through taxes levied on land and property.
The SLC report makes the case for ongoing reform to improve the way land is taxed north of the border, outlining the steps needed to increase the part land values can play in the nation’s finances and help deliver Scottish Government land reform policies.
A “vital first step” is the creation of a new publicly available cadastral map, showing the extent, value and ownership of land across Scotland.
The report identifies tax as a powerful way to deal with vacant and derelict land, proposing additional reliefs on non-domestic rates (NDRs) and council tax for new-build properties on long-term abandoned sites and giving councils new powers to apply NDRs on newly empty properties to discourage deterioration.
The SLC also addresses natural capital – the value of ecosystem services such as absorption of greenhouse gas emissions, crop pollination and flood prevention – and the emerging carbon market, to tackle climate change.
The report recommends particular attention should be given to how taxation can secure “a productive balance of public and private benefit from future carbon values”.
It also proposes specific consideration of Land and Buildings Transaction Tax, suggesting changes could increase diversity in land ownership and address the risks to a just transition of high land prices associated with carbon.
Offering income tax relief to encourage more letting of agricultural land is a final recommendation, but would require engagement on a UK basis to secure changes to what is a reserved power.
SLC chief executive Hamish Trench said: “Land is our most valuable asset and Scotland has scope to tax land in ways that better support the Scottish Government’s policy priorities, but this needs to be considered in a careful way that acknowledges the complexity and devolved powers.
“This report sets out steps that can be taken to steadily increase the role that land value plays in taxation, as well as specific reform opportunities to tackle priorities including derelict land regeneration and a just transition.
“Tax is a potentially significant influence in delivering Scotland’s land policy objectives and we recommend an ongoing programme of reforms.”
Mr Trench said a national conversation still needs to happen “to help build consensus on the options”.