NO doubt many will agree that a slice of the profits made from development of land in Herefordshire should be taxed for public use, especially as it is the public decision of granting planning permission which has made the development both possible and profitable.

Your article last week: "If you build, you pay", does raise two possible problems. Firstly, that land might be held back from development in the hope or expectation the tax may be dropped in a different political climate. Secondly, that any tax could be passed on to house-buyers, thus putting up the price of houses and disadvantaging first-time buyers.

There is a strand of economic thinking which advocates a form of taxation which overcomes these problems. This argues it is the enhanced value of the land after planning permission which should be taxed rather than the development itself. This would act as a strong incentive to proceed with the development rather than hold back and speculate about future values and tax levels.

With regard to house prices, it is thought these are market-determined. Therefore the price could not easily be increased, and any tax would have to be absorbed by the developer. This is not regarded as a particular problem because the tax is not adding to the cost of development, but simply slicing off part of the of the windfall gain emanating from the difference in land value before and after planning permission.

Although, as the article points out, this may not be easy to calculate precisely, it is clearly very substantial especially if we are talking of a green field agricultural site being given permission for housing. Thus, it still makes sense for permission to be sought and the development to take place as it is much more profitable than leaving the land in its previous use.

There will be details to work out, but the principle of using this form of taxation to help pay for public projects is well worth considering. In fact, there is a good case for arguing that the tax system generally should be more geared towards the use of land and other resources rather than on income and spending, but that's another story!

STEVE LAVENDER, Bodenham, Hereford.