Lower land transaction tax mulled

The government may reduce the land transaction tax to stimulate the lackluster property market, Premier Chang Chun-hsiung (張俊雄) told lawmakers yesterday.

The government "would considering reducing the land transaction tax," Chang said.

However, officials at the Ministry of Finance cast doubt on such a tax cut, citing a weak demand in the real-estate sector, saying the move may generate only a "limited effect" on domestic property market.

The finance ministry has estimated that this year's projected land tax revenue is NT$93.98 billion -- which is a difficult target to reach, ministry officials said.

The market's problems mainly stem from an oversupply of housing units and a slowing economy, analysts said.

The ministry believes any reduction in the land transaction tax may cause tax revenue at local governments to decline, since most of the transaction tax goes to local coffers.

The current regulations levy a tax following transactions as the value of property increases. If the value of the property increases by 100 percent, the selling party has to pay a land transaction tax of 40 percent. If the value increases by between 100 to 200 percent, the sellers have to pay tax of nearly 50 percent. For a 200 percent increase, a 60 percent tax is levied.

A reduction in the tax may not stimulate demand because the tax is levied on the seller, not the buyer. Officials said tax is already low by international standards.

Meanwhile, officials said that land transactions remain weak because construction companies are remaining cautious because of sluggish private consumption.

Annual tax revenue from property transactions, which averaged NT$1.3 trillion to NT$140 billion per year in the past, fell to NT$80 billion last year, the ministry said.