A prominent property developer yesterday accused the government of going back on its promise after the Ministry of Finance said it was planning to change how profits on property sales are taxed.
Shining Group (鄉林集團) chairman Lai Cheng-i (賴正鎰), who also heads the General Chamber of Commerce, said that when the government adopted a system requiring sellers to register the actual prices of property transactions, it promised that those values would not be used as the basis for levying capital gains or income taxes on the sellers.
However, the government yesterday proposed taxing those gains based on actual transaction prices rather than government-assessed values, which are usually far lower than market prices and dramatically lower tax liabilities.
Lai said the proposed change would affect the 88 percent of households that own a home.
He said it would be unwise for the government to roll out such a policy after the central bank has tightened rules on mortgage lending, which have had a negative impact on the property sector, the housing market and home owners.
Most Taiwanese prefer to keep their money in Taiwan by investing in real estate because they trust the government, but recent moves to curb speculation and now the proposal to tax capital gains on property sales could undermine that confidence, Lai said.
Whether the government did promise to never use actual transaction prices as the tax base as Lai claims is a matter of debate.
In late 2011, when the Ministry of the Interior was pitching the system, it did say that there would be no connection between the proposed actual price registration system and the system for taxing profits from property sales.
It also said that the new system would have to collect a huge volume of data before the prices registered could be used for assessing taxes, and that it did not expect this to happen within two to three years. That left the door open on the idea in the future.
The system, which took effect in August 2012 after three laws were amended on Dec. 30, 2011, was designed to bring greater transparency to the nation’s often-murky real-estate market which developers used to their advantage in talking up prices.
Should the proposed tax change be approved, it would dramatically increase the tax liabilities of people who buy and sell property as an investment.
The mere mention of the proposal could hurt sentiment in the real-estate market following other measures to keep a lid on high housing prices, Lai said, urging the government to refrain from taking any more tough measures because those in place have already tempered property transactions and home prices.
However, Minister of Finance Chang Sheng-ford (張盛和) said he was confident that the proposed tax change would gain wide public support.
“Most people would agree that property transactions should be taxed based on their actual prices,” Chang said by telephone.
He added that the ministry would do its best to draft a proposal that would not require too many difficult legislative amendments.
The Income Tax Act (所得稅法) and the Selective Goods and Services Sales Tax Act (特種貨物及勞務稅條例) may be the only two acts that need to be revised, he said.
Additional reporting by Amy Su
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