![]() But governments may create extra taxation levies on particular pieces of land, to fund specific infrastructure projects. The basic TIF model doesn’t involve raising tax rates per se. ![]() The big winners from any infrastructure improvement are adjacent private land owners, as they receive windfall gains in the value of their land without paying for the infrastructure. ![]() The taxation revenues can be forecast and included in future budgets as a means of paying for the infrastructure costs up front. This increased tax revenue can come in the form of local government rates, state government land taxes and stamp duty, Commonwealth capital gains tax and even GST on property – meaning that all three tiers of governments can benefit. Governments can gain extra taxation revenue as a result of the development, without necessarily needing to raise the existing taxation rate. New infrastructure, such as improved transport networks, can raise land values because of the extra amenity that infrastructure provides. Value capture can use the idea of tax increment financing (TIF), which has been used extensively in the United States to deliver urban rail projects. So what is under the hood of land value capture? It has also been described, most notably by the Property Council of Australia and shadow infrastructure minister Anthony Albanese, as another sneaky way to tax us. It has become a divisive issue for developers. This allows private investors to reap the benefits of urban development, for example by developing shopping centres at new train stations, using the projected extra tax revenue as a means of funding the infrastructure in the first place.ĭepending on whom you listen to, the idea is either infrastructure’s magic bullet, or not all it’s cracked up to be. Put simply, land value capture involves using the additional value created on land around urban rail, as a result of the railway’s existence, to fund the rail itself. With the federal government aiming to kick-start investment in urban infrastructure, pledging A$50 million of public money in the 2016 budget to look at alternative financing mechanisms, attention is turning to the idea of “land value capture” as a means to attract the necessary funds.
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