Ronan Lyons did a report for the Smart Taxes group in December 2011 on Site Value Tax.
This section outlines the economic rationale and other key features of site value taxation.
Site Value Tax is a charge on the unimproved value of land, i.e. it is not directly affected by physical capital built on the land (such as buildings or other improvements). It is instead a tax purely on the value of location. It is expressed as a percentage of the value of the site and is typically payable annually. As outlined below, the idea of a Site Value Tax (SVT) on the value of a plot of residential land has a long pedigree in economics.
To start with an example, suppose a three-‐bedroom semi-‐detached property in one particular location is worth €140,000. The build cost is €125,000 while the plot if land size 0.03 acres is worth €15,000. This means the value of an acre in that location is approximately €500,000. A Site Value Tax if 2% per annum would mean an €300 tax for this property (2% of €15,000). A two-bedroom or four-bedroom property on the same site would be subject to the same tax bill, as they differ in value only by the built capital and not by the underlying value of the land.