The government has no plans to scrap the luxury tax, Minister of Finance Chang Sheng-ford (張盛和) said yesterday, because the tax may help keep the housing market healthy by slowing short-term speculative transactions.
The government would only consider scrapping the luxury tax if three conditions were met: adjusting the current land value increment tax so it is not imposed on real estate sold less than one year ago, bringing the current assessed land value closer to market price and the disappearance of improper speculation from the property market, Chang said.
“For the sake of keeping the house market healthy, the luxury tax will not be scrapped,” Chang told reporters before a legislative question-and-answer session.
The ministry introduced a special tax on selected goods and services, known as the luxury tax, on June 1 last year, to suppress short-term speculative transactions in the real-estate market.
However, lower-than-expected revenue from the tax, and the sharp contraction of real-estate transactions after the tax took effect, had lawmakers from the Finance Committee raising questions.
As of the end of last month, revenue from the luxury tax totaled NT$5.3 billion (US$180.26 million) during the 16 months since it was introducted, two-thirds less than the ministry’s forecast of NT$15.1 billion per year, ministry data showed.
In the first eight months of this year, registration of building transactions posted a 17.2 percent contraction from a year ago, the Ministry of the Interior’s statistics showed.
Democratic Progressive Party (DPP) legislators Hsu Tain-tsair (許添財), Wu Ping-jui (吳秉叡) and Hsueh Ling (薛凌), as well as Chinese Nationalist Party (KMT) Legislator Lo Ming-tsai (羅明才), said the tax should be scrapped because it has failed to contribute significantly to national coffers and has dragged down the real-estate industry.
However, Chang said the contraction in transactions showed that the tax has helped slow speculation in real estate. He also said generating revenue for the government was never a major factor in introducing the luxury tax.
KMT legislators Lai Shyh-bao (賴士葆), Alex Fai (費鴻泰) and Tseng Chu-wei (曾巨威) supported maintaining the luxury tax, but they asked the ministry to review the feasibility of lowering tax rates for existing homes.
Chang refused to say if he supported the idea of reducing the tax rates.
The rates of house tax and land value tax for dwelling are 1.2 percent and 0.2 percent respectively, while the beneficial rate of land value increment amounts to 10 percent, data showed.