In recent years, we have seen foreign investors and conglomerates buying land and buildings and quickly reselling at a profit. Media have reported regularly on investors and landlords acquiring wealth through realty investment. Meanwhile, because of the gap between the market value of luxury housing and the government’s “current land value” and “assessed house value,” the rich purchase such housing to avoid tax. Property prices are surging in urban areas, while the government’s finances are in dire straits. These are key sources of public discontent. Now the Taipei City and County governments have proposed a luxury housing tax, but will it be effective?
After Premier Wu Den-yih (吳敦義) took up his post in September, he suggested that affordable housing be built near airport subway lines on expropriated land to prevent housing prices from soaring. But we must not forget that zone expropriation often involves converting farmland.
Take Taipei County’s Danhai New Town (淡海新市鎮) for example. The area has been idle for almost 10 years since it was first developed. With a capacity of 300,000 residents, it was part of a government supply-oriented policy aimed at reining in housing prices. Yet, the development rate remains less than 10 percent to this day. In addition, average housing prices are between NT$100,000 and NT$150,000 per ping (3.3m²) in Linkou Township (林口), Taipei County, and Nankan (南崁), Taoyuan County, along the airport subway line.
Moreover, there are more than 1,000 empty living quarters there. There is no need for the government to convert more land to build houses through build, operate, transfer (BOT) or operate, transfer (OT) projects.
Competition among major international cities has helped create excellent urban living environments, encouraging the rich to invest in or purchase real estate. Over the past few years, Taiwanese builders have built luxury houses in previously unfavorable areas, improving their surrounding environment and boosting the real estate value.
The government should feel optimistic. By proposing a luxury housing tax, it will become impossible for local governments to tax short-term speculation. The tax is a targeted tax, which shows that local governments have lost control of the real estate tax base.
Real estate taxes are considered an important source of local tax revenue to improve public facilities and the quality of living. In 2005, the central government proposed slashing the land value increment tax to boost the realty market, and lawmakers passed the legislation with surprising efficiency. Similarly, local governments’ assessments of land and housing values are far from the true market value because they are currying favor with the public.
Statistics show that for each new luxury housing project that costs at least NT$100 million in Taipei City, the sum of its land value and assessed housing value are less than one-third of its market price. The sum of its land value and housing tax, meanwhile, is significantly less than annual maintenance costs.
Prices for regular housing in areas surrounding the project rise, meaning they enjoy relatively low land-value tax and real-estate tax. As the central government has cut local tax rates and local governments have cut the tax base, the cost of holding onto property has fallen. With excessive capital on the market, property ranging from luxury housing to old homes and office buildings in urban areas have become top targets for investors and speculators.
The media report extensively on the huge profits made by foreign investors and insurance companies buying and selling property, or on the high incomes of landlords who own dozens of houses. Yet local authorities make excuses, saying that they do not have accurate estimates of land and housing values. The result is inaccurate assessments of the land and housing tax base that are unfair if we compare luxury housing with regular housing nearby. This also cuts into the government’s tax revenues.
At least for the short term, the government should review the division of “land value districts,” announcing current land values by treating individual communities as land value districts or further narrowing such districts to reflect market prices. Construction costs and street values should be taken into consideration.
A medium-term approach should integrate the land administration agencies for land value assessment and the tax administration agencies for housing assessment into an independent assessment agency. It should amend the land value increment tax, learning from the real estate transfer tax to levy taxes in line with market prices.
The targeted luxury housing tax is not an appropriate long-term policy for the nation’s tax system. The real estate tax is a key financial source for local infrastructure. The government create a fair environment with a reasonable tax base and reasonable rates. This would lead to greater tax revenues, in turn allowing for improvements in rural infrastructure and urban environments. This would also make our cities more competitive internationally.
Yang Song-ling is dean of the College of Social Sciences at National Chengchi University. Cho Hui-hua is president of the Real Estate Appraisers Association, ROC.
TRANSLATED BY EDDY CHANG
Speaking at the Copenhagen Democracy Summit on May 13, former president Tsai Ing-wen (蔡英文) said that democracies must remain united and that “Taiwan’s security is essential to regional stability and to defending democratic values amid mounting authoritarianism.” Earlier that day, Tsai had met with a group of Danish parliamentarians led by Danish Parliament Speaker Pia Kjaersgaard, who has visited Taiwan many times, most recently in November last year, when she met with President William Lai (賴清德) at the Presidential Office. Kjaersgaard had told Lai: “I can assure you that ... you can count on us. You can count on our support
Denmark has consistently defended Greenland in light of US President Donald Trump’s interests and has provided unwavering support to Ukraine during its war with Russia. Denmark can be proud of its clear support for peoples’ democratic right to determine their own future. However, this democratic ideal completely falls apart when it comes to Taiwan — and it raises important questions about Denmark’s commitment to supporting democracies. Taiwan lives under daily military threats from China, which seeks to take over Taiwan, by force if necessary — an annexation that only a very small minority in Taiwan supports. Denmark has given China a
Many local news media over the past week have reported on Internet personality Holger Chen’s (陳之漢) first visit to China between Tuesday last week and yesterday, as remarks he made during a live stream have sparked wide discussions and strong criticism across the Taiwan Strait. Chen, better known as Kuan Chang (館長), is a former gang member turned fitness celebrity and businessman. He is known for his live streams, which are full of foul-mouthed and hypermasculine commentary. He had previously spoken out against the Chinese Communist Party (CCP) and criticized Taiwanese who “enjoy the freedom in Taiwan, but want China’s money”
A high-school student surnamed Yang (楊) gained admissions to several prestigious medical schools recently. However, when Yang shared his “learning portfolio” on social media, he was caught exaggerating and even falsifying content, and his admissions were revoked. Now he has to take the “advanced subjects test” scheduled for next month. With his outstanding performance in the general scholastic ability test (GSAT), Yang successfully gained admissions to five prestigious medical schools. However, his university dreams have now been frustrated by the “flaws” in his learning portfolio. This is a wake-up call not only for students, but also teachers. Yang did make a big
RSS