Developer bashes government over its tax reform plan
July 3, 2014, 12:05 am TWN
TAIPEI -- Lai Cheng-i (賴正鎰), a prominent developer who heads Taiwan's General Chamber of Commerce (全國商業總會), questioned the government's credibility on Wednesday after the Ministry of Finance said it was planning on changing how profits on property sales are taxed.
Lai charged that when the government adopted a system to register the actual prices of real estate transactions, it pledged that those values would not be used as the basis for levying capital gains or income taxes on property sellers.
On Wednesday, however, the government proposed taxing those gains based on actual buying and selling prices rather than on values assessed by the government that are often far lower than market value and dramatically lower tax liabilities.
Lai, the chairman of the Shining Group (鄉林集團), said the reform would likely affect the 88 percent of households in Taiwan that own their own homes.
He argued that it was unwise for the government to roll out the policy at a time when the central bank has tightened rules on mortgage lending that have caused a negative impact on the property sector, the housing market and home owners.
Many people kept their money in Taiwan by investing in real estate because they trusted in the government, Lai argued, but recent moves to curb speculation and now the proposal to tax capital gains on property sales could undermine that confidence, he said.
Whether the government made the ironclad guarantee Lai claims it did is a matter of debate.
In late 2011, when the Finance Ministry was pitching the system to register the true prices at which properties were sold, it did say that there would be no connection between the establishment of the price registration system and taxing the actual profits from property sales.
It also said that the system's database would have to have a large volume of data before the prices registered could be used for assessing taxes, something that it said would not happen within two to three years. But it left the door open on the idea in the future.
The system, which took effect in August 2012 after three laws were amended on December 30, 2011, was designed to bring greater transparency to Taiwan's often murky real estate market that developers used to their advantage in talking up prices.
Should the new tax reform idea take effect, it would dramatically increase the tax liabilities of people who buy and sell property as an investment.
The mere mention of the proposal could hurt sentiment in the real estate market following other measures to keep a lid on high housing prices, and Lai urged the government to refrain from taking any more tough measures because those in place have already tempered property transactions and home prices.