A proposal to increase the tax rate for non-owner-occupied residential properties passed its preliminary review in the legislature’s Finance Committee yesterday, in line with a government pledge to tackle the problem of soaring housing prices.
The move came a day after the Ministry of Finance and the Taipei City Government met and agreed to raise the tax rate on residential properties not occupied by the owner.
Under the proposed amendment to the House Tax Act (房屋稅條例), the central government will raise the tax rate for non-owner-occupied residential properties to between 1.5 percent and 3.6 percent, from the current tax range of between 1.2 percent and 2 percent. The tax range for owner-occupied, or self-use, homes will be unchanged at 1.2 to 2 percent.
The amendment still has to be approved by the full legislature. The authorities are hoping that the new tax rates can take effect in May next year at the earliest.
While the central government sets a tax range for property taxes, it is the local governments that set the actual tax rate. And although local governments have a choice of adopting a tax rate of between 1.2 and 2 percent of a residential property’s assessed value, they all currently use the minimum rate of 1.2 percent.
Along with the proposal to set a different tax range for non-owner-occupied homes, the Finance Committee asked the ministry to clarify the definition of self-use residential properties, which will not be subject to the tax amendment.
“The ministry will define the standards for self-use residential properties in a month,” Minister of Finance Chang Sheng-ford (張盛和) told reporters.
Preliminary statistics compiled by the government shows that about 85 percent of residential properties in Taiwan are owner-occupied homes, while more than 660,000 people own three or more properties.
The Finance Committee also authorized local governments to adopt a different housing tax rate for people owning more than one property.
The committee approved an amendment to increase the tax range for residential properties used as private clinics or business studios to between 3 percent and 5 percent — the same as the tax range for properties used to conduct business — from the current range of between 1.5 percent and 2.5 percent.
Chang said the finance ministry would discuss with the Ministry of the Interior the feasibility of building more low-cost apartments for rent using state-owned land to increase their supply in the Greater Taipei area to counter unreasonably high housing prices.
Compared to other developed economies, Taiwan has a relatively high number of homeowners, Chang said, adding that people should be more open to the idea of renting a home instead of burdening themselves with a mortgage for a lifetime.