ADDRESSING THE QUESTION OF ECONOMIC EMPOWERMENT
Land Value Capture (LVC) is a set of mechanisms used to monetize the increase in land values that arise in the catchment area of public infrastructure projects. LVC theory states that if you own property in an area and government extends infrastructures services of, say, a road in the area, the value of your land will increase. You should therefore pay a tax on your property that is proportionate with the gain you are likely to enjoy as a result of government investment. Some countries such as United Kingdom have laws which are in extreme. Public agencies tax direct beneficiaries of their investments which are adjacent to the infrastructure because, it is assumed that they generate unearned profits. The value of any land is determined by its proximity to various amenities both public and private.
ASSUMPTION OF LAND VALUE CAPTURE
If the price of your land increases by 100% as a result of government investment in your area, then you should be able to pay the same amount of value of increase to government in form taxes. Other governments levy a tax of 30% while others place it at 60%. Let’s say you have land in Kayunga and government choses to construct a hydro power dam at Isimba where you happen to own a piece of land. Your land of five acres is valued at, roughly, fifty million shillings. On completion of the dam, the price of your land could have gained worth from say the initial price of 50 million to 70 million. Within five years the value could possibly double to 100 million which is 100% increase in price. According to LVC, you are supposed to pay a tax of 100% to government because it is assumed that the investment by government is what conditioned the value appreciation of your land. The terms of payment of this tax vary from country to country but the principle object of the theory remains the same. Some countries give a specified period within which to pay (instalments) this tax while others have stringent measures that require you to pay the lump sum at once. LVC assumes that the increase in the value of your land is not as a result of your effort but the effort of the government. LVC is as controversial as it can get. Various schools of thought have emerged globally and are being challenged about land tax. Land being the most important factor of production, any levy on it has a direct bearing on the production potential of the country.
hOW TO UTILIZE THE LAND
Economists are not in agreement about which method is most efficient for countries to adopt in ensuring a fair land tax regime. Poor land tax justice system could have a reverberating impact of an economy as was witnessed in Zimbabwe when the country introduced radical measures to redistribute land mainly targeting the white minority farmers. It must however be appreciated that for any country to achieve social justice and meaningful development and equitable distribution of wealth, the question of land has to be squarely addressed through a well-thought-out mechanism that ensures majority of the people own land and use it constructively. Again it is not only a question of land but its use as well. Governments must therefore ensure that people own land but also use it productively. There is a delicate balance between ensuring that people who own land utilize it and those who own large tracts release some of it to the have-nots. The challenge arises where the have-nots do not have the means to make the land productive. Cases have been widely reported of land redistribution measures which have been executed only for the landless who get land through appropriation, end up selling it back to wealthy landlords because the former cannot afford to utilize the land.
One of the most important pillars of an efficient city is appropriate land use which in turn is determined by land policies and institutions that support urban efficiency. Increasing the density of economic activities is one of the key features of successful urbanization, enabled by using land for higher value activities overtime. Inadequate urban land management is a challenge especially in developing countries. LVC and land use are very important aspects in determining the trend of not only urban but rural development as well. Uganda’s scenario may not be presently ripe to start thinking about LVC but the country is certainly late to repeal the obnoxious land laws by coming up with land reforms that are progressive and pro-development. Development comes faster where land management and use is enlightened. You can distinguish a developing country from a developed one by a scrutiny of their land laws and how they both utilize their land. Developing countries look at land as a perpetual asset worth admiring while developed ones look at land an ongoing business concern which should only facilitate business transaction irrespective of who owns it. Uganda needs to first address its land question in order for her to overcome most of its economic challenges.