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Incremental land-value tax to drop to 40 percent

The Ministry of Finance yesterday reached a consensus with local governments to permanently cut the incremental land-value tax -- a capital gains tax on property transactions -- by 20 percent.

Nelson Yu (游能淵), deputy director-general of the ministry's Taxation Department, told a press conference yesterday that the top tax rate on land transactions will be permanently reduced from 60 percent to 40 percent.

The central government, in addition, agreed to compensate local governments for their tax losses in light of the reduction, Yu said.

He added that the permanent tax-rate proposal will soon be submitted to the Executive Yuan before a legislative approval to facilitate the new taxation scheme.

The ministry hopes to enact the new taxation scheme in January when the three-year proposal to temporarily halve the land tax ends so that the tax rate wouldn't go through a drastic up-and-down in a short time.

In late 2001, then premier Chang Chun-hsiung (張俊雄) halved land-value tax to 30 percent for a period of two years. The reduction took effect in early 2002 and is scheduled to end next January after a one-year extension was given a year ago.

The ministry, however, in its discussions with local governments yesterday, didn't mention the idea of raising the government-appraised land-value.

The government-appraised land value of a property, which the land tax is levied from, is usually lower than the property's market value.

To make up the tax losses, the ministry had earlier said it would hike government-appraised land value in order to increase land-tax revenues, but later softened its stance, saying that "it's within the local government's discretion."

The proposal has sparked opposition from the private sector, which accused the government of insincerity for saying it would cut the land-value tax to boost the property market yet proposing to raise the land tax.

In response to criticism, the ministry's secretary-general, Joanne Ling (凌忠嫄), on Tuesday told a press conference that the government's proposal to raise the government-appraised land value was aimed at ensuring fair taxation.

"Even if the government-appraised land value were raised, there is not much room for the land tax to be increased," Ling said.

She said a land-value adjustment would not hurt taxpayers.

Most local governments are reluctant to raise the government-appraised land value anyway, because of electoral pressure.
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