Infrastructure Australia has released a new paper that argues value capture can work in Australia and should be considered for all public infrastructure projects.
Infrastructure Australia’s advisory paper, Reform Series, Capturing Value: Advice on making value capture work in Australia said that while value capture can work, it was important to be realistic about the role it can play in funding necessary infrastructure.
Infrastructure Australia Chief Executive, Philip Davies, said, “This advisory paper provides guidance to governments and the private sector on how value capture can be applied in the Australian context.
“Government budgets are under significant constraint. Funding for infrastructure must compete with recurrent expenses such as health and education spending, which is why the Australian Infrastructure Plan highlights the importance of diversifying the available sources of infrastructure funding.
“Most people value high-quality infrastructure with access to services like high-frequency public transport, which can cause an increase in property value.
“Value capture taps into this by capturing some of the uplift around infrastructure investments, and in doing so can reduce the volume of taxpayer funds needed to pay for infrastructure.”
Mr Davies said in the case of large-scale infrastructure projects, even a 5-10 per cent contribution to project costs through value capture could represent a saving to the taxpayer in the hundreds of millions of dollars.
“It’s about making the funding split fairer between the direct beneficiaries of infrastructure investment and broader taxpayers, while also increasing available funding for infrastructure.
“Governments should be clear on the problem they seek to solve and ensure the mechanism that is applied is the most effective and appropriate approach.
“Importantly, opportunities for value capture need to be identified and implemented early in planning processes, before specific options are developed, to maximise benefits to taxpayers.”
Mr Davies said high quality, detailed and long-term strategic planning was the foundation of effective value capture and governments also had to be transparent in their application, engaging industry and the community about how much is being raised, from whom, and how all parties will benefit.
“There are a number of different value capture mechanisms that can provide individual solutions for specific projects, however having a broader-based land tax system would offer the best opportunities for sustainable, longer term reform.
“A broad-based land tax would involve removing many exemptions to existing taxes on land value, streamlining charging processes and phasing out other charges such as stamp duties.
“The key thing to remember is that while value capture may bring benefits to governments, the capacity to apply a value capture mechanism cannot change the underlying economic viability of the project,” Mr Davies said.
