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Policies and Mechanisms on Land Value Capture

Taiwan Case Study

Alven H.S. Lam and Steve Wei-cho Tsui

January 1998, English

This paper reviews government policies on capturing and distributing the profits of land value increase in Taiwan. Based on the political ideology of the country’s founding father, Dr. Sun Yat-sen, the government adopted two groups of techniques to carry out value capture policies: land-related taxation and land use regulations. Land taxation techniques capture profits after land values had changed, while land use regulations capture the potential profits based on the predicted land value changes in the future. These techniques were developed over the past forty years to achieve economic, social, and political objectives. This paper examines these techniques in the context of different economic, political, and social circumstances to better understand the initiation and the effectiveness of these policies. Most of the techniques were successful in certain time periods, but became less effective or even contradictory later. It is a challenge for the government to use the right techniques to capture the tremendous wealth created from rapid urbanization. It is also a challenge to reform these policies when they are no longer effective. The comparisons of these value capture policies would be a good reference for policy makers in other countries to undertake future actions on capturing and distributing benefits from land development.