Introduction

While Baden-Württemberg introducing a Land Value Tax (LVT) was a recent development, it's not the first time Germany has implemented this policy. In the late 19th and early 20th century, there was in fact a German colony where the administration was very influenced by Georgism.

The place in question was Kiautschou Bay, China (now Qingdao). It was under German control from 1898 to 1914. I'll be primarily using the following sources for information on the history of how this colony came to be run in a Georgist manner, and how they implemented their tax policies. If I make any mistakes, please do let me know!

• Land Reform in Kiaochow, China: From 1898 to 1914 the Menace of Disastrous Land Speculation was Averted by Taxation
• Kiautschou Bay Leased Territory Wikipedia entry
• Aus Kiautschous Verwaltung : die Land-, Steuer- und Zollpolitik des Kiautschougebietes / von W. Schrameier (English: From Kiautschou's administration : the land, tax and customs policy of the Kiautschou area / by W. Schrameier)

Historical Context

In 1897 Germany occupied Kiautschou Bay, China. Supposedly this was in retaliaiton for 2 German missionaries who were killed by the Big Swords Society (cool name, also known as Great Knife Society, which is also a cool name), however Germany had been looking to create navel bases in East Asia as other colonial powers had done. After the missionaries were killed, the german Admiral von Diederichs wired "May incidents be exploited in pursuit of further goals?" which suggests such occupation somewhere was already the plan.

After negotiations with the Chinese government, Germany took a 99 year leasehold on the Kiautschou Bay. There was a disagreement within Germany as to whether this should be under the Imperial Colonial Office or Imperial Naval Office. At the time, the German colonies in Africa were experiencing agressive land speculation. The German Land Reform League published articles petitioning the Colonial Office to change their policies to discourage such speculation. These articles were picked up by the some within Naval Office, including Alfred von Tirpitz and Admiral von Diederichs, who was the officer who took Kiaochow.

Von Diederichs succeeded in keeping the Kiaochow under the Naval Office. They proceeded to run the area under Georgist principles. von Diederichs is Quoted as saying "It was our firm conviction from the outset that land speculation with all its consequences, as we experienced them in other East-African coastal areas, had to be made impossible."

Kiautschou Bay stayed under German control until World War 1 in 1914, when the Japanese navy bombarded and occupied the territory.

Technical Implementation

The Kiautschou Bay Leased Territory was run with a Single Tax on land. Rather than being based on land rents (the cost to rent the land), there was a yearly tax of 6% of the purchase value. Henry George argued that around 85% of land rents should be taxed, and the rental price of land is often in the 4-8% range of the purchase price. So 6% of purchase price is quite a good approximation of George's suggested rate.

For comparison, Baden-Württemberg land value tax rate is ~0.045%, so here we're talking a tax rate that's over 100 times highter.

Land values were to be reassesed at regular intervals. There was also an "Increment Tax", which was 33% of the land value increase, which was to be paid every upon sale of the land, or every 25 years if the land was not sold. The increment tax apparently wasn't a fiscal policy, and was purely to discourage sepculation.

Economic Effects

The tax policy achieved their goal. The colony's revenue growth from 1899 to 1913, showing significant increases:

• 1899: 38,000 M.
• 1906: 1,205,000 M.
• 1909: 2,366,000 M.
• 1911: 5,325,978 M.
• 1912: 6,739,480 M.
• 1913: 7,234,741 M.

There was significant investment from Germany, and the returns on that seem to have been capture by land value tax, rather than going to private land owners:

Germany invested upwards of $100 million in modernizing the territory of Kiautschou. The impoverished fishing village of Tsingtau was laid out with wide streets, solid housing areas, government buildings, electrification throughout, a sewer system, and a safe drinking water supply, a rarity in large parts of Asia at that time and later. The area had the highest density of schools and highest per capita student enrollment in all of China, with primary, secondary, and vocational schools funded by the Berlin treasury and Protestant and Roman Catholic missions

The revenue data shows it worked well - steady growth without speculative bubbles, reliable revenue generation, and apparent success in promoting development while preventing speculation.

Based on the steady revenue growth pattern, it's reasonable to conclude that had German administration continued, this tax model could have sustained further infrastructure investments without requiring external funding. The data shows a self-reinforcing cycle where public and private improvements increased land values, which then generated more tax revenue.

Comparative Analysis

The lack of land speculation stands in contrast to other colonies. The above mentioned German colonies in Africa had issues, but also Singapore and Hong Kong.

This quote from "Anecdotal History of Singapore" p.89 suggests Sir Thomas Stamford Raffles (who is "largely credited for the founding of contemporary Singapore") encouraged land speculation:

"When they were selling the filled up ground [near the Square] Mr. Raffles advised me to buy four or five lots, as afterwards this part of the town would become valuable. I answered where could I get money enough to pay for the land. I saw the lots selling at auction for $1,200 and $1,150, and there was besides the expense of building. Mr. Raffles smiled and said, never mind about the money, take the land first and we can talk about payment hereafter." Abdullah then expresses regret about not following this advice: "It was solely on account of my own stupidity and want of judgment that I lost this opportunity of purchasing land, by following Raffles' advice, and I now repent..."

That's the same Raffles as Raffles Hotel in Singapore, where the Singapore Sling was created.

Hong Kong also expirenced significant land speculation, as outlined in the book Building Colonial Hong Kong: Speculative Development and Segregation in the City by Cecilia L. Chu:

Despite persistent inequality, Hong Kong never ceased to attract diferent classes of sojourners and immigrants, who strived to advance their social standing by accumulating wealth, especially through land and property speculation

Unlike Singapore and Hong Kong, where land speculation created enormous wealth for a small number of landowners while burdening the broader economy, Kiautschou's LVT approach redirected land value increases to public coffers. The stark contrast demonstrates how different land policy choices can fundamentally shape a region's economic trajectory, even when starting from similar circumstances.

Colonial Context

While the implementation of LVT was effective from an economic perspective, we must acknowledge that this occurred within a colonial context, where local Chinese residents had limited political representation and autonomy (Schrameier, Aus Kiautschous Verwaltung, p149). Henry George himself criticized colonial rule precisely because it imposed economic systems without democratic consent, and devoted several chapters of Progress and Poverty criticising the British rule over Ireland, China, and India, and how their policies there caused millions of deaths due to famine.

The Kiautschou example offers valuable policy lessons about land taxation mechanics and economic outcomes, but it's important to separate these technical insights from the problematic colonial power structures through which they were implemented.

Lessons for Modern Implementation

The Kiautschou Bay Leased Territory shows how LVT can be useful in discouraging speculation and promoting sustainable development and efficient land usage in a new developing area. A high LVT provided strong, increasing revenue, and didn't hamper development.

While the contexts differ significantly—a 19th century colonial territory versus a 21st century democratic city—Berlin's current housing challenges stem from similar economic forces. Both situations involve valuable urban land, development pressures, and the potential for speculation to distort markets. Berlin, already in the grip of speculative price increases and facing a housing affordability crisis, cannot implement LVT on a blank slate as Kiautschou did. Instead, Berlin must navigate the transition from an established property system where speculative value has already been capitalized into land prices. This difference in starting points doesn't invalidate the underlying economic principles, but it does necessitate a more nuanced implementation strategy.

Sudden dramatic changes in policy would be very disruptive (as we're seeing currently with US tariff policy). While other places like the US and Hong Kong derive a lot of tax revenues from land/property taxes, in Germany it is currently a small proportion of tax income (income tax and VAT are the big ones here). So an introduction where the LVT on a similar scale to current property taxes (as Baden-Württemberg has done) would likely be more appropriate and politically acceptable.

The size of the tax is also interesting, 6% of land value is very high compared to many current land value taxes. So to achieve the benefits maybe it needs to be that high so speculators can't still make a profit. So while a low land value tax would still be preferable to our current property tax system (less administrative over head, easier to collect, can't be evaded, less forms to fill out), a gradual approach would be more appropriate - starting with a moderate LVT that grows incrementally over time while proportionally reducing other taxes (particularly those on improvements, labor, and business activity). This phased implementation would give property markets time to adjust while still signaling a clear long-term policy direction.

Another important lesson is that regular reassessments of values were also important to Kiautschou, and would also need to be considered. In 2017 berlin property prices grew 21%, making it the fastest growing in the world at the time (with land values involved in driving this), it's clear how important it is to reassess frequently and accurately.

The benefits of implementing a meaningful LVT in Berlin would address several pressing issues:

• Encourage efficient land use by making it costly to hold valuable land without developing it
• Reduce empty apartments and combat speculation - as Die Linke recently highlighted: 'Mehr als 40.000 Wohnungen stehen in Berlin leer - trotz akuter Wohnungsnot!' (More than 40,000 apartments in Berlin are vacant despite acute housing shortage)
• Create a more stable housing market by reducing speculative price volatility
• Generate public revenue that could be invested in affordable housing and infrastructure

Unlike punitive measures that only target vacant properties, LVT addresses the underlying economic incentives that make land speculation profitable in the first place. The Kiautschou experience shows how changing these incentives can transform development patterns.

Conclusion

The Kiautschou Bay example demonstrates several key lessons for modern LVT implementation:

• Even at high rates (6% of land value), LVT didn't impede development - it actually facilitated it by discouraging speculation and encouraging productive use of land
• Regular reassessment of land values was crucial to the system's effectiveness
• Revenue generation increased steadily rather than following boom-bust cycles
• Public infrastructure could be funded through captured land value increases

For Berlin, this historical case offers evidence that LVT can work effectively in practice, not just in theory. While Berlin's established property markets would require a more gradual approach than a new settlement, the fundamental economic principles remain valid. A well-designed LVT could help address Berlin's housing affordability challenges by discouraging land hoarding and speculation while generating revenue for public needs.

The Kiautschou experience also underscores the importance of designing systems that capture land value increases for public benefit - especially in rapidly appreciating markets like Berlin's.