Blogs

 

Value capture hard to get right: Grattan Institute

By intouch * posted 21-03-2017 15:38

  

A ‘value capture’ tax – promoted by the Turnbull Government as an alternative way to fund major transport infrastructure – is good in theory but difficult to put into practice, according to a report from the Grattan Institute.  


The report What price value capture? argues that value capture is by no means a ‘free bucket of money’ and recommends that state governments should “generally avoid value capture taxes because better, fairer and simpler taxes are available to them.”

Value capture is a policy that sees governments “capture” some of the windfall gains for landowners that result from building a new piece of infrastructure and use the money to help fund the project.

Transport Program Director and report co-author Marion Terrill says: “It may be attractive in theory, but there is nothing easy about capturing value.”

“Drawing a boundary around a new project to distinguish between those who must pay the new tax and those too far away to benefit is bound to involve rough justice. People on one side of the boundary will not be happy to get a tax bill when their next-door neighbour doesn’t.”

Terrill says the apparent fairness of value capture may be an illusion because it is hard to apply to infrastructure such as roads and hospitals where the benefits tend to be spread more broadly.

“There is nothing fair in the beneficiaries of rail projects paying extra tax while the beneficiaries of road and other projects do not,” she says.

The report also highlights the concerns that value capture schemes are also less efficient than broad-based taxes because they require more precision in valuation and create opportunities for corruption.

The Grattan Institute suggests an additional broad-based, low-rate property tax on all land may be a better option for governments seeking to fund major new projects.

“If governments nevertheless want to try to capture value from specific projects, then the tax should be part of a consistent legislative regime designed to minimise corruption, and levied on all properties within a designated zone at a fixed rate of the increase in the unimproved land value between the date of official commitment and two years after completion.”

However, the report’s conclusions have been strongly disputed by some.
 
In an article titled Why the Grattan Institute is wrong on value capture, Curtin University’s Sebastian Davies-Slate, Rohit Sharma and Peter Newman label the report ‘worrying’.

“The Curtin University Sustainability Policy Institute contests this pessimistic view of alternative funding options for public transport,” they say in the Fifth Estate article.

“One contemporary example is the Réseau électrique métropolitain in Montreal, Canada. This project is a 67km metro system, estimated to cost C$5.9 billion. Of this, the provincial pension fund Caisse de depot et placement du Quebec has offered to provide C$3 billion, from the funds it manages." 
0 comments
313 views