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Value capture: a good idea to fund infrastructure but not easy in practice

The Grattan Institute's Marion Terrill and Owain Emslie write in The Conversation (20.3.17) that a broad-based land tax to fund urban infrastructure projects is a simpler proposition to implement than the currently popular 'value capture' model.

'Is “value capture” a wonderful untapped opportunity to fulfil all our infrastructure dreams? Or is it just a new way to sting the taxpayer? Our new report casts a cold, hard gaze over value capture, and finds that it’s a good tax in theory, but will prove very hard to put into practice.

'Value capture is the name given to a policy whereby governments capture some of the increased value of land that results from building a new piece of infrastructure. Typically, the money the government “captures” is used to help fund the project.

'At first glance, value capture seems marvellously fair, because it applies only to those who benefit from the particular project. So the people of western Sydney do not help fund a new railway station on the North Shore. But look a little closer: it also means that affluent inner-city residents don’t help fund a better railway station in Melbourne’s outer northern suburbs.

'… Yes, if value capture is done the right way, as a tax that embraces the principles of equity, efficiency and simplicity, it could make a positive contribution to infrastructure funding in Australia. But the truth is, there is nothing easy about capturing value.'

 

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