MOF to propose property tax reform
By Lauly Li ,The China Post
July 3, 2014, 12:05 am TWN
TAIPEI, Taiwan -- Premier Jiang Yi-huah (江宜樺) yesterday said he has requested that the Ministry of Finance (MOF) officially propose a reform plan before the end of this year regarding a single capital gains tax over the sale of property, land and houses as a whole, in a bid to make Taiwan's tax system more equitable.
Speaking at Academia Sinica's convocation of academicians yesterday, the premier said tax reform on capital gains from real estate transactions has been discussed for over a decade. Noting that he recently exchanged opinions with Finance Minister Chang Sheng-ford (張盛和) several times over the issue, Jiang said both he and Chang agree with the academics' proposal to combine the building and land tax to combat tax avoidance.
The premier explained that according to current regulations, when a house is sold, a “land value increment tax” is levied based on the differences between the government-assessed value of the land when it was bought and sold.
Deter Housing Speculators
Jiang went on to say, however, that due to the fact that government-assessed values are far less than the actual market values, and only the value of the land is considered, the tax burden is low compared to the actual gains, which some of the housing speculators will see as a tool for tax avoidance.
The premier explained the tax reform plan, saying that instead of separating taxes for land and structures, the taxes would be assessed on gains from the sale of real estate as a whole (both land and the building). The gains taxed would be the actual amount made by the seller rather than an amount estimated by the government, Jiang said.
Effect of Tax Reform
In order to avoid harming the “innocent,” those who own only one housing unit will not be affected, Jiang said, noting that those who own more than two housing units and have had them for more than 10 years may not be affected. Owners of farmland and farmhouses will also not be affected, Jiang said, adding that, however, such a proposal will not be finalized until the government listens to more expert opinions.
Jiang said he expects that real estate developers and speculators will raise objections to the tax reform proposal, noting that, however, this tax reform plan will “truly” prevent the continuing rising prices of homes in Taiwan and make the tax system more equitable.
Jiang said the MOF will convene a series of public hearings between the end of July and August to listen to more expert opinions on the issue, adding that the MOF is expected to submit a formal tax reform plan to the Executive Yuan at the end of this year for cross-ministry discussions.
Academician Wang Ping (王平) during the convocation commented on Jiang's tax reform plan, saying that tax reform should be as simple as possible. Wang further noted that a complicated tax system may fail to impose taxes successfully and will lead to public objections. Capital gains taxes for stock market transactions are an example of unsuccessful tax policy, Wang added.