Everyone is always grumbling about taxation. People are of late incessantly complaining about urban development. There is a link.

There are people who cannot develop their property. It could be because the properties are scheduled, and this to differing degrees, or because they are in zones where the policies limit the development to one or two storeys. These are good policies and must be maintained if we are to retain a decent qualify of life. It must be admitted that such owners cannot fully extract the economic benefits emerging from the explosion in property prices over the last three decades. The question one asks is: Is it just that some people cannot extract the development value from their property (which is higher than the intrinsic value) while others are free to do so?

This alone does not create an injustice. The injustice comes from the fact that within the restricted areas some are allowed to develop their properties and others not or some are inexplicably allowed to do more than others. This is unjust for two reasons. One is that people who are in the same circumstances are treated differently, with policies being applied inconsistently. The second injustice is that, after this has happened and the area ruined, the property value of the non-developable property owner is further reduced. We have no legally-effective rules for compensating such property owners for this effect.

Let us recognise the fact that properties carry with them value for what they are in the context in which they lie. So a scheduled property, or a villa, or a town house, has value because it is scheduled, in a villa area or in a town and in a beautiful environment, assuming it remains so. On the other hand, when a person is allowed to develop a three-storey apartment block with a penthouse on his site he gets additional value - he can sell it for more - while slashing away at the value of the restricted owners next door and close by.

To achieve justice in this regard we need to develop rules where those who are able to benefit from extra development need to compensate those who are not able to exploit value for the public good. We need to preserve our urban environment. One way we can achieve this is through rules of taxation. When a tax applies, people naturally avoid doing what provokes it and when a tax exemption or incentive applies, people naturally militate towards that effect.

Developers of restricted urban zones should pay a higher rate of tax to make up for the harm. Those who suffer the consequences through reduced value, or simply inability to exploit market conditions due to the restrictions, should enjoy positive discrimination.

This could be done by granting the victims of this kind of injustice a better deal when their loss is realised. That happens when they sell their property for a lower price and so we can apply a lower rate of capital gains tax and stamp duty - or an exemption - to their transaction. To make up the shortfall, we can apply a double rate of tax to the profits on newly-developed property, particularly in restricted zones and for this purpose pleasantly stable urban zones, even if not beautiful, should be treated as restricted.

The same injustice emerges when such property is divided or transmitted by succession. The injustice is sharpest when a person who owns restricted property is then taxed on a valuation based on the prices on the market including the developable property (which carries a premium) when, in reality, the scheduled property is often a burden to preserve and difficult to sell at reasonable prices. We ought to apply deferrals or exemptions to make sure there is no incentive to sell this kind of property for re-development when the property is scheduled or lies in restricted development zones. Furthermore, restoration costs should gain deductibility at triple the cost of restoration.

We need to be careful that people do not have to sell property for development because of the very tax they have to pay on their inherited property. In my view, transmission tax should be deferred to the date when the heirs actually sell the property and have liquidity. The tax should be charged on the sale price not speculative valuations.

We need to make sure that the way we are applying the tax to property ownership and transactions is just and that this is not unnecessarily fuelling the destruction of our urban environment.