The government is considering revising a “luxury tax” on housing transactions to raise more revenue and further curb property speculation, but an academic yesterday proposed a different approach.
Chuang Meng-han (莊孟翰), a professor of industrial economics at Tamkang University, said the government should raise the costs of owning second houses to curb property hoarding.
Land and property taxes in Taiwan are only about 10 percent of those found in other countries, Chuang said, and could be easily increased, making it more expensive for people to hold many homes at one time.
The government should also levy higher property taxes on foreign home buyers to control the demand for housing, Chuang said.
As for advice from other academics that the government should impose the luxury tax — which taxes sales of houses owned for only short times — not only on home sellers, but also on buyers, Chuang said such a move would have a limited impact.
He said that if the government were to tax home purchases by buyers, it would have to distinguish between homes being bought to live in and those being purchased as an investment — a distinction, Chuang said, that is not always easy to make.
The government is considering revising the luxury tax, which was introduced to curb speculation in an overheated property market on Jun. 1, 2011, in part because of a revenue shortfall.
As of April this year, the luxury tax had generated only NT$7.7 billion (US$257 million) since being first introduced, far below the previous government estimate of NT$15 billion a year, prompting the call for change.
The program has been a victim of its own success. As intended it curbed the practice of buying a home with the intent to sell it for a profit in a short time. According to the Chinese-language Economic Daily News, the number of homes sold within two years of purchase has dropped by more than 90 percent since the tax was imposed, with the percentage of homes purchased for investment purposes falling to 15 percent.
Under the luxury tax, those who sell a residential property within a year of purchasing it must pay a tax of 15 percent of the sale price.
The tax rate falls to 10 percent on houses sold between one and two years after their purchase.
The Ministry of Finance has commissioned the Chunghua Association of Public Finance (中華財政學會) to study possible revisions to the tax, with many ideas already floated.
Academics have suggested extending the taxable period to homes owned for four years or less, including non-urban land and agricultural land as items subject to the luxury tax, and imposing the tax on home buyers, as is the case in Hong Kong and Singapore.
The ministry said it has no preconceived notions on how the tax should be revised, but it said measures used overseas may not be applicable in Taiwan.
The agency will organize a hearing next month to take the pulse of public opinion after the association releases its report, scheduled for Wednesday.
Meanwhile, developers and construction companies warned that people working in real estate could lose their jobs if the taxable years are extended.
Real estate companies also expressed concern that extending the taxable years would cause a downturn in high-end housing markets and push up prices in the low-end market.
OWNERS SELLING UP
Wu Kuang-chung (吳光中), editor-in-chief of housing Web site HouseFun (好房), said many homeowners have decided to sell their properties recently in anticipation of the revision, as well as because of global economic uncertainty and fears over the phase-out of quantitative easing in the US.
According to a HouseFun survey, the number of properties commissioned for sale in Taipei last month increased by 4 percent from a month earlier, with the figure up 27 percent in the city’s Songshan District.