INSIGHTS ON ‘BUILD, BUILD, BUILD’: HARNESSING LAND VALUE CAPTURE

THE PHILIPPINES’ landmark “Build, Build, Build” infrastructure agenda is critical to unlocking the remaining constraints to Philippine growth. As the government works to turn bold ambition into tangible results, it is imperative to consider fairer, and largely untapped, funding alternatives.

Wider use of land value capture (LVC), which draws on the increase in the value of land adjacent to new infrastructure developments, merits a place high on the list of revenue sources the government should explore as a supplement to taxes and user fees.

At present, the government relies primarily on taxes and fees to support infrastructure projects. Indeed, an important feature of the recently passed Tax Reform for Acceleration and Inclusion Act is that 70% of the additional revenue it generates will help pay for the P8-trillion “Build, Build, Build” program. Proceeds from the act will be added to the P1.097 trillion — about a third of the 2018 budget — previously allocated by Congress.

The common criticism against taxation as a funding source is that members of the public do not benefit equally from infrastructure projects. User fees may seem fairer, but they rarely produce enough revenue to cover operations and maintenance costs, let alone finance construction or debt obligations. And it goes without saying that fare increases are always a hard sell with the public.

Land value capture is attractive because of its fundamental fairness: LVC taps into the newly