Finance Minister Grant Robertson considering property 'value capture' tax to fund rail

Friday, 9 March 2018

Labour Finance Minister Grant Robertson hints at novel ways to raise revenue for Auckland's desperately needed infrastructure projects.

Finance Minister Grant Robertson has signalled that property owners benefiting from the building of the Auckland rail links could be subject to a special 'value capture' tax.

Speaking at the Auckland Chamber of Commerce/Massey University annual finance lunch at the Pullman Hotel in Auckland, Robertson said the Government was investigating 'innovative' ways to bridge the funding gap to pay for the rail and roading infrastructure the country needs, especially in Auckland.

'Between the balance sheets of the Auckland Council and the Government, we still don't have enough,' Robertson said.

'Minister Phil Twyford and I are actively looking at opportunities for how to do that.'

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Those options included 'value capture' which the Productivity Commission championed early last year.

Finance Minister Grant Robertson says the Government is focused on inclusive growth where all New Zealanders share in economic growth.

This is a process under which a special tax is levied on property owners deemed to have benefited from the building of infrastructure.

'If we are going to make big investments in things like [Auckland's City] Rail Link, and a series of different rail links, people will benefit from that. How do we capture the value of that, and use that to fund the development?' Robertson said.

In March last year, the Productivity Commission gave an example of how that might work.

If the land value of a property benefiting from a new rail link increased in value from $100,000 to $250,000 over five years – a 150 per cent increase compared with a rise of 120 per cent in land values in the wider area – a tax could be levied on the $30,000 gain attributable to the infrastructure improvements.

The tax could be levied alongside of rates, the commission suggested.

It's not the only way household personal finances could change in a bid to find the money to build infrastructure. KiwiSaver could also be impacted.

Responding to a question from Sam Stubbs, founder of the Simplicity KiwiSaver scheme, Robertson said: 'We want to see that [KiwiSaver] capital invested as much as possible here'.

KiwiSaver was predicted by Treasury to reach $200 billion by 2030.

Robertson envisaged 'packaging up' infrastructure projects in ways KiwiSaver funds could invest in.

'Also in 2021, we come back to reviewing the government providers of the KiwiSaver funds,' Robertson said.

'That gives us an opportunity to define the criteria by which somebody can become a default provider.'

'I think New Zealanders will love the idea of their savings, or a greater proportion of their savings going into projects in New Zealand. What we have got to make sure is those projects are packaged up in a way that they give the rate of return that people want.'

Robertson detailed the Government's economic plan to the gathered Auckland business leaders, saying the focus was on ensuring all New Zealanders shared in economic growth.

'If we don't harness the potential of every single New Zealander we will never be the country we should be,' he said.

Robertson also praised the signing of the Comprehensive and Progressive Trans-Pacific Partnership trade deal in Chile on Friday.

'The next stop will be the European Union. There's a very important opportunity there,' he said. 'We will also talk to the UK, help them out, teach them how to write a trade agreement, and hopefully make it with us.'

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