Academics were divided yesterday over the effectiveness of the special sales levy in helping curb property speculation, but agreed that the measure needed to be reviewed two years after its implementation.
The debate came after the Ministry of Finance said on Friday that it would re-evaluate the tax, with houses resold within two years after purchase being subjected to a levy of up to 15 percent starting in June 2011.
Su Jain-rong (蘇建榮), who teaches public finance at National Taipei University, likened the tax to unlicensed construction projects that should be removed and replaced with a property tax based on market value to ensure social fairness.
“The special sales levy, or the luxury tax, has only slowed housing transaction, but has failed to trigger a price correction as seen in the past one-and-a-half years,” Su said by telephone.
Many investors have opted to wait two years to cash out, which they can afford to do thanks to low interest rates, Su said.
The ministry should overhaul the property tax system and set land and house tax rates in line with their real value so as to raise holding costs and deter prospective speculators, Su added.
Setting taxes based on the property’s market value has become more practical after the government introduced a policy in August last year requiring that prices for all property transactions be listed online for public viewing, he said.
The government could start by limiting the luxury tax to select areas such as Greater Taipei, Su said, adding that housing prices in some parts of the nation remain unchanged, but owners have to pay the luxury tax just the same.
Chuang Meng-han (莊孟翰), an industrial economics professor at Tamkang University, said it was time for the government to review the luxury tax and retire it.
Local governments have raised assessed property values in recent years with drastic increases in some districts, Chuang said.
The move will gradually close the gap between assessed and real property values, especially since local governments have pledged to press ahead with upward adjustments, he said.
Authorities can extend the capital gains tax to property investments if it promotes social justice, so that people with larger gains shoulder heavier tax burdens, he said.
Chang Chin-oh (張金鶚), a land economics professor at National Chengchi University, disagreed, saying that property speculation would return if the government canceled the luxury tax.
Lax execution is to blame for the sluggish tax revenue from the luxury levy, which has only brought in NT$5.97 billion (US$200.67 million), compared with the ministry’s forecast of NT$15 billion, Chang said.
“The Ministry of Finance should crack down on tax evasion if it is to re-evaluate the special sales levy,” Chang said. “It must be effective or developers and brokers would not have called for its abolishment.”
The government would confuse the market about its stance on housing policy if it drops the luxury tax, he said.
Hua Ching-chun (花敬群), professor of finance and banking at Hsuan Chuang University, said the government should step up efforts against tax evaders, while updating property taxes if it is serious about reining in housing prices.
While not perfect, the luxury tax must stay until tax reforms are in place, Hua said.