Hold on to the Ground Duty:
A Message to Fellow Danes
Ib Christensen and Karsten Larsen
[Reprinted from Grunskyld, November 1999;
translated by Ole Lefmann]
(1) The Danish Government is preparing a frontal unheard-of attack on
the fundamental principles of property taxation, which in Denmark
first of all consists of Ground Duty. The Ground Duty is a duty levied
on the value of land without buildings. Any objective economic
analysis tells that the value of land should be taxed most heavily,
whereas income and property both created by labour should be taxed
(2) Since 1922 the Danish Taxation on Real Property has been based on
the principle that the community has a superior right to tax on, plan
for, and regulate land. In principle the Governmental assessment
institution has distinguished between the by nature provided and
public created values of land on the one hand, and the labour created
values of buildings on the other hand.
(3) That principle has built up a common understanding and acceptance
of the Real Estate Taxation, and it has become a model for other
countries. However, this understanding has been blurred through the
recent decades because of populist politicians and political parties,
who made an effort to please the interest of private homeowners'
acquisitiveness and agricultural special interests. This led to
partial destruction of the Ground Duty, which, however, doesn't alter
the fact that it basically has been the American economist Henry
George's philosophy and economic theory on public collection of the
rent of land that has been underlain the local authorities' collection
of Ground Duty. George published his principal work Progress and
Poverty in 1879. The book has been translated into Danish under the
title Fremskridt og fattigdom.
(4) George's ideas have especially been promoted by Danmarks
Retsforbund (English: The Danish Justice Party), but also, though more
plainly, by other parties such as Det Radikale Venstre (English: The
Left Wing Radicals) and Socialdemokratiet (English: The Social
(5) Unfortunately the two latter parties have for years contributed
to watering down the Ground Duty. At the end of the 1960'ies the Tax
on Incremental Land values was abolished, and in the middle of the
1980'ies was put on the Municipal Ground Duty an upper limit of 2.4
per cent of the public assessed land values. Today, as the Counties
have to collect 1 per cent Ground Duty, the maximum Ground Duty will
amount to 3.4 per cent, whereas, as the Municipalities have to collect
no less than 0.6 per cent, the minimum Ground Duty will amount to 1.6
(6) The Ground Duty collects today approx. 2 per cent of all taxes in
Denmark, compared to approx. 5 per cent in 1960. In spite of the fact
that it is not a rather big amount, one should think that even the
greatest opponent of Ground Duty could feel satisfied. But that is far
from reality, which appears >from the following.
The Government Scheme
(7) The base of the Real Estate Taxation is periodic public
assessments of almost all real estate properties in Denmark. For each
property is made a separate assessment of the value of land and of the
value of the building(s), and put together these values make the total
value of the property. The value of the entire property has until
recently been the base of the so-called Income Tax on Imputed Rentals
of the estate, on which the taxpayer resides. That tax will disappear
next year and be released by a 1 per cent tax on the total value of
the properties. The separately assessed value of land makes, however,
the base of the Ground Duty.
(8) This distinction between the values of buildings and of land is
far more important than generally believed. The fact is that a tax on
land values can never have the same negative effects on enterprise and
production as can any of the other taxes. Land values are certainly
not created by individual persons. Land was given to mankind by nature
and it obtains economic value with the development of society. The
value of land makes an excellent source of taxation which is
self-evident to economists.
(9) When speaking about Real Estate Taxation, it is evident also,
that there is a great difference between taxes on land and taxes on
buildings. If values of buildings have to be taxed, the tax should be
kept on a very reasonable level - probably no more than the 1 per cent
to which the new property tax is sat, corresponding to the level of
the previous Income Tax on Imputed Rentals of the property in which
the taxpayer resides. A high tax on the value of buildings will hamper
improvements of buildings and lead to decline of the standard of
dwellings - an effect that Ground Duty doesn't have and can never get.
(10) The important principle - the distinction between land and
buildings - is the Government now ready to abolish. This contrasts
with the noble traditions of the two parties in the Government, but
worst of all it conflicts with common sense and justice. It all
appears from the report of the Committee sat up by the Minister of
Taxation, and published by the Minister. The report is titled
'Modernising and Simplifying of the Assessment of Real Estates'.
(11) Certainly it has to be added that the Minister of Taxation, Mr.
Ole Stavad, in his answer to the Member of the Parliament, Mrs. Lise
Bo Nielsen, on September 6th, 1999, has dissociated himself from the
proposal of the Committee, but that is definitely not sufficient to
rely on for feeling safe. Unfortunately the answer of the Minister was
far from being a categorical refusal.
(12) One might wish for the plan of the Committee that it should
widen the base of taxation by imposing property tax with the same
percentage on the values of land and buildings. In a time where
unlimited mobility of goods, services, capital and personnel undermine
the base of taxes on income, wealth, companies, VAT and excise duties,
the tax on real estates remains untouched and must therefore be
(13) However, that idea is unrealistic. The private homeowners'
acquisitiveness is still there, and with around 1.2 million homeowners
(of around 3.5 million voters [inserted by the translator]) its
political power is considerable. If the plan becomes reality it will
undoubtedly lead to the same consequence as in USA, Germany and other
places: The political pressure for freezing the public assessments of
and/or the taxes on real estate at an unrealistic and laughable low
level, will become irresistible. And then one will definitely not get
greater revenue in the long term, far from that. The structure of
taxes will be strikingly deteriorated and taxes on income and consume
will have to be increased.
(14) As being a part of this picture it has to be mentioned that the
ministerial Committee proposes the assessment system changed in such a
way that the property owners get an effective possibility to hamper a
reasonable assessment. The burden of proof will be turned round so to
say, which means that the assessment authorities will have to document
the correctness of their assessment versus the owner's more or less
fictitious estimate determined by the owner's wish to get off paying
as little a property tax as possible.
(15) Further comes to that, that it is societal inappropriate to tax
improvements of buildings. It will influence the distribution of
wealth in the society, as the proposal will favour the owners of
comparatively high values of land, and opposite it will disfavour
owners of comparatively high values of buildings. That is a matter of
fact. Members of Housing Co-operatives and owner-occupiers of flats
and also shop-owners have to pay up. The same is due to tenants in
general, whereas farmers on the largest farms take advantage at the
expense of the small farmers, and owners of attractive detached houses
and holiday cottages will be gilded. The anti-social character of the
proposal is more than obvious.
(16) Finally is to be added that "the reform" deprives the
political decision-makers of an especially important instrument for
governing of the economic policy. The existing system with the
separate assessment of land values makes it relatively easy for the
political majority to aim for a tax policy with increased Ground Duty
and decreased taxes on income (at least as looked upon from a
technical point of view, as the apparatus is at their disposal). For
instance a kind of Ground Duty not taxing the present land values more
heavily than today, but in the future taxing the incremental values
more heavily. Such a policy has not been accepted until now, but why
destroy this instrument of the economic policy - an instrument that
may be the only one left over to a small, open economy like the
Danish? The political decision-makers are shooting themselves in the
foot if they pass the proposal of the Committee.
Political attitudes to the right of ownership.
(17) To the non-socialistic parties the idea of the rights of
ownership is especially connected with real estate. They do not at all
acknowledge the idea of public created values. Taxes on land and on
buildings are for them the same thing. But those having a liberal
outlook on life ought to be aware of the fact that a tax on production
has to be kept as low as possible, which will be possible with the
highest possible tax on income not occurring from productive efforts.
(18) When assuming that a "reform" like the one proposed by
the Committee will evoke a drastic hatred towards tax on property,
which will gradually undermine it completely, one should have no
objection against the reform. And one will find support to this
attitude in the course of events in other countries.
(19) To the Socialists it's also as broad as it is long. They will
even find it being a progress that not only the values of land are
taxed but now also - on equal terms - the values of buildings, not
bothering whether or not they are created by efforts of production or
not. The socialistic idea of the rights of ownership doesn't
distinguish between public created values of land and productive
created values of buildings. In the classic Marxism it was exactly
private ownership of the means of production that was brought out as
being the source of exploitation. Land was not looked upon as being of
(20) The socialistic parties ought to realise, however, that their
wish to tax "immovable property" as one thing may cause that
the tax on property suffers the same fate as did the tax on fortune:
it became abolished. If the Socialistic People's Party and the Unity
List Party accept the new proposal this will be a unique political
naivety, almost a criminal offence. Unfortunately this case is not
attracting much of the awareness of the electorate. That, however,
does not diminish its importance.
(21) As to the distribution of wealth there has during the latest
generation by the undermining of the tax of property (the Ground Duty)
come about a massive transferring of wealth to the advantage of the
owners of real estates and to the disadvantage of the non-owners of
real estates. However, the major part of the owners of real estates
have their main income from wages, transferred income, pensions or
self-employment. Therefore, in reality the advantage of the
development has fallen to those owners who own considerable values of
properties, i.e. those who most of all are affluent citizens having
huge income >from speculation in the values of land and real
(22) Economically the development has favoured passive investment in
land and real estates, to the detriment of active production in
enterprises. That has damaged employment and the economy in general.
A politically inspired work.
(23) Administratively the proposal of the Committee will not imply
any savings as the assessment system will be changed to a control
system. And further the abolition of the separate land value
assessment makes it difficult to calculate the important factor of
valuation: the value of neighbourhood, environment and public service.
For instance, a recent much discussed case in which a large, older but
well kept residential house including site was acquired at a price of
Million Dkr 4.1, immediately after which the owner demolished the old
house and erected a new. The assessment authorities followed up this
fact increasing all sites in the area considerably as they, in
accordance with the spirit and wording of the law, found that the
price was paid solely for the land. Corrections of this type will be
impossible in the future.
(24) The report is a political inspired work, which emerges clearly
from the fact that the Committee is dominated by civil servants who
are all in concord. Only the representative of the Association of Duty
Councils (Danish: Skyldr=E5ds-foreningen) has taken reservations, may
be because he is familiar with the point of the matter. However, also
the representative of the National Union of Site Owners has taken
reservations; he represents among others the entrepreneurs who will be
hit directly and the tenants of private owned buildings of flats who
will be hit indirectly. From the report's 6th chapter is quoted his
very relevant objection:
"The transition to tax of values of properties will reduce the
incitement of carrying out improvements and renovations of real
estates, because the increased value of the property immediately will
But that kind of common sense is obviously in minority in the
(25) It is sensational that the representative of the interest of the
homeowners' acquisitiveness (the National Union of
One-family-house-owners) had no reservations against the conclusion of
the report. That might, however, be taken as a cynical calculation of
the proposal provoking so much hatred against the tax on real estates
that it will share the fatality of the tax on fortune. It is also
thought provoking that not a single member of the Committee is
representing the Non-profit-making Housing Estates, the Tenants'
Associations, the Non-profit-making Housing Co-operatives or
Owner-occupiers of flats. But they are of course all among those being
hit by the proposal.
(26) Finally is to be mentioned that none of factual economic
knowledge are represented, neither the Economic Forecasters nor for
instance the Labour Movement's Vocational Council. Is that due to the
government's fear of confronting the proposal with economic expert
knowledge and professionalism?
(27) It also characterises the very quality of the report that the
argumentation is catastrophic thin and affected. The arguments (or
what to call it) supporting the abolition of the separate assessment
and taxation of the value of land is, that people in general find it
difficult to understand Ground Duty, and then incidentally a wish of
(28) Simplification is not prescribed in the report, and taxes are
never abolished only because they are unpopular or difficult to
understand. This argument has simply no proper or factual relevance.
Even if it had so, also the Income Tax should be abolished, as very
few people are able to calculate their own personal tax! Taxes like
general income tax, and by the way also company taxes, are far more
complicated than is Ground Duty. An assertion in the report, that many
taxpayers complain especially about the assessment of land values,
while the complainants agree in the value of the entire property, is
not at all documented. In return this assertion is repeated several
(29) The report mention, however, some remarks about certain
technical problems with assessment of the value of the sites in areas
where just a few empty sites have been sold. But here again is not
consulted any expert knowledge of assessment of properties for
supporting the point of view. And even if such problems might have
some relevance, why is not written a single line about the possibility
of introducing better techniques or methods of the valuation of land?
Undoubtedly because the conclusion was almost written in advance.
(30) The report was published in August this year (1999), but has
been almost unnoticed by the public media in spite of its far reaching
character. Where are the observance of the political parties and the
economical commentators of the press?
(31) It should not wonder if the course of this matter becomes the
same as the abolition of the Tax on Fortune or the reform of the Job
Release Scheme. Suddenly over night, in a deal about the Financial
Budget, the matter appears as an already decided reality, without any
warning or preceding democratic debate.
(32) The Socialistic People's Party and the Unity List Party are
probably appointed by the Government as being those going to deal the
Danish Ground Duty its deathblow, and thereby in the long run
abolishing all taxation on real property. Hopefully it will turn out
otherwise. Is there after all in the Left Wing Radical Party as much
as a microscopic left over of Georgism, that may induce that party to
kill the crazy plans as soon as possible?
- was the chairman of the Danish Justice Party from
1967-74, 1975-78 and 1982-84
- was a Member of the Danish Parliament from 1973-75 and
- was a Member of the European Parliament from 1978-79 and
- is a member of the Danish Henry George Society and has
been so for a generation.
- is Master of Political Science.
- is a member of the Danish Henry George Society.
- is a member of the board of the Danish Henry George
- is a member of the International Union for Land Value
Taxation & Free Tra= de.
- is the editor of GRUNDSKYLD, Danish magazine for Politics
and Economics since 1996.
Ole Lefmann is the Deputy President of the International Union
for Land Value Taxation and Free Trade.