While the government is mulling a plan to cut the capital gains tax on land transactions, analysts say that the tax cut may push land prices even lower.
The Ministry of Finance said last week that the government may cut the land capital gains tax to help boost the transaction in the sluggish property market. Under an initial concept by the ministry, the tax would be cut for a period of two years.
Many analysts, however, said that cutting the capital gains tax may send the land prices tumbling by as much as 10 percent in the near term, thanks to the oversupply and the excess selling pressure in the property market, local Chinese-language media quoted an industry analyst as saying yesterday.
The newspaper reported anal-ysts as suggesting that anyone interested in buying a house after the tax cut may want to "stop, see and listen" because land prices may hit a new low as a result of the policy change.
According to Pacific Rehouse Co Ltd (太平洋房屋), a leading Taiwanese realtor, the government's moves are seen as an emergency measure to help boost the property market.
The tax cut may not help property owners, who are already suffering major losses because of a prolonged slump in the sector. (The capital gains tax, according to Taiwanese law, is usually paid by the seller, not the buyer.)
Housing prices have continued to tumble over the past decade, and insiders believe housing prices may continue to fall since housing is in a state of oversupply.
Since economic conditions are weak, demand is unlikely to rise in the near-term. Realtors say that the government should offer low-interest loans to stimulate buying. Such measures, combined with a tax cut, may help activate the property market.
The paper said the government has achieved a consensus with the opposition lawmakers to cut the capital gains tax by as much as 50 percent, which means the current three-tier capital gains tax rate of 60 percent, 50 percent and 40 percent may be lowered to 30 percent, 25 percent and 20 percent, respectively.
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