House price windfall tax take suggested

City-dwellers are invited to have a say on whether they could stomach ‘‘value capture’’ taxes to help pay for infrastructure.

Value capture taxes, which are used in some cities overseas, are paid by property owners on increases in the value of their properties as a result of a local council building infrastructure such as a train link, or a new road, or rezoning the property.

It’s one of several possible new ways to tax households and businesses to pay for maintaining and upgrading infrastructure in towns and cities, outlined by the Productivity Commission in an issues paper.

Others include local GST-like expenditure taxes, and switching from using capital values to land value to calculate property rates.

The commission will report on its conclusions in the middle of next year, and issue a final report to Government by the end of November, commission chairman

Murray Sherwin, who acknowledged that proposals for new forms of taxation could raise strong reactions, said.

Once the final report was delivered, it would be up to Government, and opposition parties, to decide how to take it forward.

The commission said increases in property values as a result of council investments in infrastructure were enriching private landowners, and targeted rates, or fixed charges, were poor ways of taxing them on their gains. ‘‘Neither . . . strongly reflects the windfall gains that a private owner receives,’’ the commission said.

A law change would be needed to allow the ‘‘uplift’’ in land values to be taxed by councils.

Sherwin said value capture had been used in Melbourne, Australia, to help pay for inner city rail.

The commission was also seeking views on whether councils should switch to using land value from capital value to calculate rate bills, which could result in some people struggling to pay, and being forced to sell up.