Russian Land Law and Privatisation
[Reprinted from Land & Liberty, 1994]
Kenneth Jupp, who died
in March 2004, was for 15 years a judge in the British High Court.
He was awarded the Military Cross for bravery in the Second World
War, and at the time of this essay served as an advisor to several
Russian municipal authorities.
WHAT A CHALLENGE! To put the land, now owned entirely by the State,
into the hands of private persons or legal entities!
What a land! Vast and mysterious; 95 times bigger in area than Great
Britain, two and a half times that of the United States.
What variety! Stretching from within 800 miles of the Arctic Circle
in the North, to 800 miles from the Tropic in the South. From east
lowest, covering eleven time zones: a huge range of climate!
When privatising land, its immense diversity is the first important
point to deal with. The land varies:
- In fertility, from the fertile "Black Earth" region
of European Russia to the desert regions in some other parts, and
there is every shade of difference in between those extremes.
- In mineral deposits: The Urals are rich in mineral deposits of
all kinds: elsewhere there is only soil and in some places just
- In Siberia there is coal enough to supply the whole world's
needs for many years to come, and three million square miles of
timber forest But these resources are only in certain places.
However rich the land, the resources are scattered all over the
- There are mighty rivers for navigation, harnessed in some
places for hydro-electric power; elsewhere land is arid, or
seriously lacking water.
And what about the people into whose hands the land is to go? Again
the great diversity between individuals is the important point. The
Russian people have all the necessary skills -- intellectual (who can
beat them at chess?) -- artistic (ballet and literature) -- and
physical (circuses and gymnasts). The people are every bit as
variegated as the land: ranging from the sluggish to the brilliant in
all three respects.
IN PRIVATISING land the whole object is to ensure that the right
people are put in possession of the right land. The differences
between land and the differences between people have to be matched so
as to bring about a happy conjunction of people with resources: Mother
Russia happily married to her people!
The Communist system and the capitalist system (both) have failed to
achieve this object. A command economy rigidly forces people and land
into an ill-fitting alliance, so that the wealth produced is
insufficient to provide for the people's needs. The so-called 'free'
economies of Western Europe produce more than the people need, but
many of the people are too poor to buy it So it stands in mountains of
food and lakes of wine while governments out of public funds support
millions of unemployed, and pay producers to keep land out of use --
it's called 'set-aside'. This leads to higher and higher taxation. The
millions of unemployed, who would gladly work so as to be able to buy
things, simply degenerate into dependance on the State. To keep this
system going the people are taxed so heavily they remain poor unless
they happen to have control of land. Government help to the needy puts
taxes up and up.
Command economies don't have unemployment to that extent, but they
too tax their people into abject poverty.
The trouble in both types of economy is that the revenue naturally
due to the State is not properly collected. If it were, that revenue
would lighten taxes, and poverty would to that extent be relieved.
RUSSIA is in a position of advantage overall the Western economies in
one respect: at present the State owns the land.
In privatising it Russia can give possession of parcels of land to
individuals or companies as they require them, whilst the government
retains at all times the rent yielded by the land, and that means the
State must retain ownership of the land in the way that Britain does
at the present time. Private possession of land but public ownership
Land is by natural law the common property of the community. By
letting anyone into possession of a piece of land, and protecting him
in that possession, the community assures him of undisturbed use of
the land together with the exclusive use of:
1. The resources not made by man -- the natural resources available
to that particular piece of land.
2. The infrastructure built by the community at public expense --
roads, railways, etc.
3. The availability of the surrounding population to act as suppliers
to his undertaking, as customers of it, or workers in it, and as
companions in social intercourse.
All lands differ over an immense range of climate, fertility,
minerals, density of population, and access to roads, railways,
airfields, etc. Justice demands that the holder of the land should pay
for these things. Rent is the measure of their value to him.
In Western countries the rent is paid to a landlord; or if the
landholder is himself lord of the land, then he keeps the rent, and is
to that extent enriched beyond his less fortunate competitors. This is
why there can never be the 'level playing-field' Westerners are so
fond of talking about, unless every holder of land pays rent-and
itmust be rental the current market level.
Because of the immense difference in productivity of different
parcels of land, the payment of rent is the only leveller. It acts
like a handicap in sport. All people holding land must pay rent, so
that all have an equal opportunity in competition with others. But if
they pay rent to a landlord every improvement of the infrastructure
simply gives the landlord more rent. The rent must go to the
governments, local and central, to pay for the infrastructure, and
used on behalf of the community.
The second important point is that all this is forever changing so
that rent must be kept up to date. Advancing science and technology
can make yesterday's arid desert into today's region of rich oil
wells. Public works financed by local or central government -- roads,
bridges, railways, airports (the 'infrastructure') -- make production
cheaper and easier: so the relative advantage of one piece of land
over another is constantly changing.
This is immensely important, and has to be provided for when
privatizing the land. Diversity is the first point to watch, constant
change is the second.
RUSSIA'S existing land law has two advantages over most Western
systems. The first is the dear distinction it makes between buildings
and the land underlying them. Thus Soviet legislation of 1922 allowed
ownership of buildings, but not of land.
The new legislation by the Federation seems to have preserved this
distinction, by taxing land and buildings separately, and at different
rates. Thus the distinction between buildings and the land on which
they stand is better understood in Russia than in the West, where
taxes are usually levied on land and building together as one entity.
Secondly, the Russian land taxes have some regard to differences
between different types of land. Thus the twelve Economic Regions have
been differently rated according to the quality of agricultural land
and the size of the cities. Resorts and cities with 'developed social
or cultural potential' pay multiples of the basic rate. This, however,
does not go anything like far enough to differentiate the subtle
variations between one parcel of land and another. Only the market can
do that: and only the market can find the true value of land. That is
why rent auctions are necessary. Once these auctions have established
a sufficiently connected picture of the different values in a
particular locality, then valuers can form a reasonably accurate
opinion as to the value of other lands which have not been the subject
Taxation in Russia is extremely complicated. A recent paper counts 43
taxes: 16 federal, 4 at the oblast (regional) level, and 23 at local
level. In the Moscow oblast three taxes accountfor97.33 of total
revenue. But these are the very taxes which strangle trade and
enterprise: namely, VAT, Profits Tax and Personal Income Tax. It is
obvious that VAT raises the price of anything which has to bear it.
Profits Tax discourages all businesses, and may make it impossible for
some to continue. This reduces competition so that those who are
better placed are able to inflate their profit Income Tax is always
unfair because it takes no account of the difficulty or ease with
which a person's income is gained. The new property taxes of 1992 on
land, on buildings individually owned, and on buildings corporately
owned, are said to have contributed less than 1 % of the budgets of
government at all levels. The buildings are assessed sometimes on
depreciated cost, sometimes at compulsory insurance valuation, and
only very rarely at market value. They have produced so little revenue
that some local authorities have found the cost of collection higher
than the yield, and have ceased collecting them. The rates of tax on
land are grotesquely inadequate to collect any significant portion of
the true rent. There is little registration of land. Documents of
title are unusual. There are reports of scandals in dealing with land.
WHAT is to be done?
All land should be registered with large-scale land maps showing each
parcel of land, its area, and its identification number.
Certificates of title should be issued to every land-holder, defining
the land and setting out any legal interests others have over the
land, such as rights of way, or passage for drains, water pipes,
telegraph or electricity cables etc. All registers should be open to
Titles and covenants
Only two kinds of title should be registrable: Perpetual Tenure and
Leasehold Tenure. Both these tenures should contain a covenant to pay
the rent as from time to time revised by government: also a covenant
to observe the planning restrictions imposed by local government. Any
change in the planning restrictions needs to be accompanied by a
revision of the rent usually upwards if the restrictions are enlarged,
and downwards if they are reduced.
Security of possession
This is vital. There must be no fear of anyone lawfully in possession
of land being disturbed, dispossessed or in any way interfered with,
especially not by government agents. As in English law, the possessor
of land should be entitled to obtain damages against anyone who
unlawfully enters upon his land. If no damage was done, he should have
nominal damages and an injunction to prevent further unlawful entry.
If he proves actual damage, he should be compensated. If the entry is
by solthers, policemen or other servants of local or national
government, he should be entitled to punitive damages for any
oppressive, arbitrary, or unconstitutional conduct on their part.
To ensure that the most suitable people get the land best suited to
them, the land should in the first instance be allotted to the bidder
of the highest rent at a rent auction. There will need to be a
Valuation Office in each locality, where these rents are recorded.
This will gradually build up a picture from which the comparable
values of parcels of land which have not been auctioned can be
It should take only a few years before a complete and sufficiently
accurate land map showing rental values is available. Once this is
achieved, yearly revaluations of rent should be instituted, as happens
in Denmark. The covenants to pay rent must therefore be drafted to
cover rent as revised. Failure to pay rent or failure to observe
planning restrictions should entail forfeiture of the land. Relief
from forfeiture should be within the discretionary power of the
IF LEGISLATION of this kind had been enacted immediately after
communism ended, everything would have been easy. But since that time,
unfortunately, some land has already been privatised, either in the
black market, or by legal means under the direction of local or
If it is impossible to recover this land from its private owners,
then it will be necessary to recover the rent of it by a system of
taxation based on the imputed rent of the land. The Valuation Office
will have to be entrusted with the duty of making sure these lands are
included in the land maps, and that the estimated rent of each parcel
of these lands is duly recorded as soon as it can be ascertained by
comparison with known rents elsewhere. These rents too should be
displayed for general public inspection.
Clearly as large a proportion of the estimated rent as possible
should be collected from the holders of these already privatised
lands. But whether this is feasible depends on (1) whether the
particular piece of land was acquired legally; (2) how much the
present possessor paid for it; and (3) what length of tenure he or she
obtained. If the number of cases in question is not too large, it is
possible the best way of dealing with them is by setting up a special
appeals court to adjudicate on each case separately. Otherwise a
taxation programme to work out a suitable land tax will have to be
devised. In any event all land held in this way must be brought into
the general system of allocation by local authorities as soon as the
period of occupancy expires.
RUSSIA is particularly fortunate because the land is owned by the
people, through their government. The government can therefore
privatise the land whilst retaining the rent of land as public
The same situation exists in England, but only in theory. All land in
England is owned by the Crown. A small part is in the Crown's actual
occupation. The rest is occupied by tenants holding either directly or
indirectly from the Crown. However, the head tenants now holding
directly from the Crown pay no rent to the Crown. In feudal times the
services and payments made by these tenants financed most of the
functions of central government. But by the middle of the thirteenth
century, in the struggle between the barons and the King, the old
feudal dues were shrugged off, and the Crown was compelled to take its
revenue directly from the whole population; first by levies on the
personal property of all save the very poor, and ultimately by taxes
on every conceivable commodity or service, and ultimately, in the 19th
century, on incomes. No trace of the feudal dues now remains, and the
head tenants are, for practical purposes, although not (this is
important) not in law, absolute owners.
The important point is that Russia should be very careful not to go
all the way down the same road as the Western world. Russia, in
putting the land into private hands, should at all cost retain the
rent of land on behalf of the people, who have, after all, created it.
It belongs to them. Nevertheless the English land law has the merit of
retaining the correct theory, and could easily be adopted by the local
governments in Russia without the faults that have distorted it in the
course of English history.
For 'the Crown' read 'the State', and you have the head tenants with
either a Perpetual or a Leasehold tenure in respect of which they owe
dues to the state in the form of rent. Sub-, and sub-sub-tenants, and
so on, pay their dues, which are passed up the line, and so to the
state in the head-rent Under that system there will be very little
need for taxation to meet government expenditure. The government will
be collecting the whole rent of the land of Russia.