Rises in land value open to taxation

New taxes levied on land that increases in value due to State infrastructure investment should be considered, according to a report from the National Economic and Social Council (NESC), due to be formally published shortly.

The report, the main details of which were first reported a fortnight ago by The Irish Times, says this could be a way to help fund the State's contribution to major infrastructure projects. However, a recommendation in an earlier draft of the report to increase user charges to help fund infrastructure and environmental programmes has been substantially watered down in the final version.

The council of the NESC is made up by representatives of the Government, employers, trade unions, farmers, and social and community organisations. This report is designed as a blueprint for talks on a new national agreement to replace the Programme for Prosperity and Fairness.

In relation to taxing development land, the Government has already introduced one measure in this area - through the affordable housing provision of the 2000 Planning and Development Act, which makes developers transfer land to local authorities at existing use value. This ensures a portion of the increased value of the land conveyed by planning permission reverts to the community.

The report says there is no reason why a similar concept cannot be extended to other infrastructure projects, such as roads and sanitation.

In its section on taxation, it says much of the benefit of the major programme of infrastructure investment under the National Development Programme will accrue to those whose properties increase in value as a result. A recent proposal to charge a levy on development land along a section of the LUAS line is an "appropriate measure", the report says, and should also be considered in other cases.

A late draft of the report had also recommended "that an increased range of user charges for the service provided by infrastructure should be considered". However, the final version says that increased user charges "could be evaluated". In a later section of the final report, it "cautions against the introduction of purely cost-reflective pricing".

The council also calls on the Government to examine actively the potential for increased financing through public-private partnerships.

The report, An Investment in Quality: Services, Inclusion and Enterprise, calls on the Government to priorities investment spending, which should be maintained at over 5 per cent of GNP, and current spending to meet specific social needs. To achieve this it says that a modest increase in the overall level of taxation should not be ruled out, although it also supports a level of Exchequer borrowing to help fund investment.

The report argues that a national partnership agreement is still the best way forward. It says wage increases should be based on the norms of our competitors and that the increases recommended under the benchmarks report for public servants can be sustainable only if they are matched by a significant rise in flexibility and overall performance in the public sector.