Finland Needs New Ways of Financing Transport Infrastructure

Ari Hyytinen, Niku Määttänen and Vesa Vihriälä

No 70, ETLA Brief from The Research Institute of the Finnish Economy

Abstract: Abstract Motor fuel tax revenue is likely to decrease in the coming years because of the shift to electric cars. At the same time, self-driving cars and so-called smart mobility -services require new type of investments into road infrastructure. The concentration of population in urban centres also adds to the investment needs. In other words, investment needs for transport infrastructure are increasing while the tax revenue generated by road traffic is decreasing. To tackle this challenge, Finland should start preparing a road fee system based on a modern positioning technology. A well-designed road fee system would allow for congestion charges thereby also helping urban planning. We should also increase property taxes to tax a higher share of land and house value increases due to transport infrastructure investments. Public-private-partnerships may also be useful in transport infrastructure investments. The fact that the government can usually borrow at a lower rate than private businesses does not imply that private financing is more expensive. This is because in a public-private-partnership, the private sector is expected to bear some of the risks.

Keywords: Transport; infrastructure; user charges; property tax; ppp (search for similar items in EconPapers)
JEL-codes: R41 R42 R53 (search for similar items in EconPapers)
Pages: 9 pages
Date: 2018-08-23
New Economics Papers: this item is included in nep-tre and nep-ure
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