Research by ESBL on land tax and windfall profits tax

Geldzak op het platteland

The Erasmus Study Centre for Local Government Taxes (ESBL) has been awarded a research project in a tender by the Ministry of Finance to investigate introducing two new municipal taxes: a land tax and a windfall profits tax. For this research, a collaboration has been formed with the Center for Research on the Economy of Local Governments (COELO, University of Groningen). Additionally, knowledge and expertise will be contributed by two subcontractors. These taxes are intended to facilitate the smooth progress of housing construction in the Netherlands by taxing (undeveloped) land on the one hand and 'windfall profits' resulting from changes in land use on the other. 

Background of the research 

Available land is scarce in a highly developed and densely populated country like the Netherlands. Various sectors, including agriculture, industry, nature, and infrastructure, make demands on this scarce land. In recent years, housing construction has become the most prominent challenge. Two problems arise in this context: 

  1. The increase in land value benefits the owner, even if they have done nothing to contribute to it. Land value can rise abruptly due to changes in amenities or infrastructure, encouraging speculation in the land market and driving up the costs of housing construction. This complicates the development and construction of affordable, qualitatively adequate housing. 
  2. Land speculators can patiently wait for the value to increase further or for a better development opportunity to arise. This can make it difficult to acquire land for housing construction within a reasonable timeframe and at reasonable costs. 

The Ministry of Finance wants to explore whether and how fiscal instruments can address these problems. First and foremost, an instrument is needed to capture unearned increases in value (windfall profits) so that speculation is no longer profitable. Secondly, there is a need for an instrument to make holding strategic land positions more expensive, increasing the incentive to use land efficiently. The introduction of a land tax and a windfall profits tax are potential solutions. 

External expertise 

External expertise in this research will be provided by Dr. ir. T.A. (Tom) Daamen (Knowledge Area Development Foundation (SKG)/Delft University of Technology) and Mr. A.P. (Anneke) Monsma. 

The research is expected to be completed in the spring of 2024. 

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