A natural experiment of changing land value taxation rates occurred in Denmark in 2007. Results suggest that raising tax rates on land does not get passed onto tenants, but instead, gets fully capitalized into land and property prices.

“The results demonstrate a clear effect on sales prices of the observed changes in land tax rates. Furthermore, the magnitude of the changes implies full capitalization of the present value of the change in future tax payments for a discount rate of 2.3 per cent, which is within the range of reasonable discount rates for households during the period in question. The analysis consequently supports the hypothesis that perceived permanent land tax changes should be capitalized fully into the price of land and property.”