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Monday Sep 12, 2011

Plan for property taxes along corridors like Gautrain

Owners of land along public infrastructure corridors like the Gautrain could be slapped with additional taxes as municipalities seek to augment thier revenues to close the widening gap between their expenditure needs and available funds.

Mayur Maganlal, the excecutive director for economic development and planning at the SA Local Government Association (Salga), said last week a possible source of additional revenue could be a tax on land along public infrastructure corridors like the Gautrain. Land values on these corridors typically arise as a result of the investment in infrastructure.

The Gautrain has also spurred a number of commercial and residential property developments around its station nodes. Areas around Gautrain stations, including Rosebank, Sandton, Hatfield, Marlboro and Rhodesfield, have commercial and residential property developments under way or being planned.

Gover nments around the world have been using various mechanisms for capturing a share of the rise in land values as a result of the public infrastructure investments.

"Many planners and economists, including Nobel laureate William Vickrey, suggest that cities could benefit by funding transit system development costs and a major portion of operating costs from land value capture, that is, by taxing a portion of the additional value of adjacent properties that result from transit accessibility," says a study by the Victoria Transport Policy Institute, a Canadian transport research outfit.

Vickrey was a Canadian economist who was the joint winner of the Nobel prize for economics in 1996.

Property economist Francois Viruly said some cities had played the property market very well by taking advantage of increases in the price of properties in and around mass transit transport systems and using the proceeds to pay for the cost of building those systems. The big debate locally was whether municipalities had developed masterplans for the Gautrain stations, he said.

It emerged during the Salga conference that municipalities were working on a tax on businesses that could raise as much as R19 billion annually.

Development charges, another source of additional revenues, are levies that are imposed on developers of new or existing properties.

"Municipalities currently significantly under-recover revenues from development charges," says Salga.

"This is increasingly problematic as the revenue foregone limits the ability of municipalities to invest in the expansion of infrastructure that supports economic growth and poverty reduction," says Salga.

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