Finland Needs New Ways of Financing Transport Infrastructure

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.

Publication info

Series
ETLA Muistio - ETLA Brief 70
Date
23.08.2018
Keywords
Transport, infrastructure, user charges, property tax, ppp
ISSN
2323-2463
JEL
R41, R42, R53
Pages
9
Language
Finnish