The Ministry of Finance expressed regret at the legislature's decision yesterday to offer a 20 percent cut in property tax on land that has been owned for 20 years or more, in addition to the new preferential rates.
The Legislative Yuan yesterday approved a proposal to permanently cut incremental land-value tax rates to 20 percent, 30 percent and 40 percent, from the original 40 percent, 50 percent and 60 percent.
In a bid to encourage long-term real-estate holdings, lawmakers also approved a proposal that those who have owned a piece of land for at least 20 years will be eligible for an additional reduction of 20 percent, while owning land for 30 years would result in a 30 percent reduction. Those who have owned land for 40 years or more are eligible for a cut of 40 percent.
"Local governments will suffer the most from the tax losses," said Joanne Ling (
The ministry had earlier estimated an annual loss of about NT$20 billion (US$630 million) in land tax for local governments if such a measure were to be approved.
Since the ministry is incapable of reversing the legislature's decision, Lin called on local governments to talk to lawmakers from their constituencies and initiate petitions to the legislature.
Minister of Finance Lin Chuan (
On Wednesday, Lin told reporters that the new tax scheme for long-term land-owners "will seriously jeopardize the nation's taxation discipline and upset the government's efforts to follow through with tax reform."
On the local bourse, the legislature's decision to permanently cut incremental land-value tax rates boosted prices of construction stocks when the market opened, although they later lost steam and erased earlier gains due to profit-taking sales. Construction shares dropped 0.41 percent on average at the close of trading.
The original tax cuts -- which the government began implementing in February 2002 -- had effectively stimulated property trading by prompting replacement demand in the last three years, Evertrust Rehouse Co (
According to Evertrust's figures, up to 37.7 percent of people who have residences older than 13 years chose to change houses last year, up 6.4 percentage points from 2000. This represents growth of more than 20 percent from the ratio of 31.3 in 2000.
Evertrust predicted that the real-estate sector will stay robust this month, as a number of house-owners are expected to put their residences up for sale by the end of the month.