The legislature’s Finance Committee on Wednesday approved a draft of the proposed luxury tax bill that would allow lawmakers to conduct the second and third readings of the bill in the coming weeks. If everything proceeds smoothly, the bill is likely to be enacted on June 1, introducing a hefty levy on the sale of certain expensive goods and services, as well as short-term property ownership in order to rein in speculation in the overheated real-estate market.
Although questions remain about whether the implementation of the luxury tax would help make the nation’s tax system more fair — will it narrow the widening disparity in income or lead to a healthier development of the real-estate market? — the issue has gained a majority of the public’s support because high housing prices are an issue that most people see as crucial to address.
On Tuesday, one day ahead of the committee review, President Ma Ying-jeou (馬英九) held a press conference to throw his weight behind the bill. He demanded that legislators from the Chinese Nationalist Party (KMT), which enjoys a majority on the committee, help push through the bill, saying he hopes the legislature will pass the bill sooner rather than later.
Ma’s public call to support the bill sent a message that as the president of the nation, the head of the governing party and the KMT’s presidential candidate, he would like people to know that he is aware of the public’s discontent about high housing prices.
However, Ma’s display of empathy with the public and authority over his party may also give rise to suspicion that the government is trying to use a quick fix to win votes without fully considering the consequences. Such things usually happen when politically motivated policies are passed during an election year. These populist policies typically gather public support in the short term, but also have the potential to create adverse side effects in the long run.
As most people continue to put pressure on the government to address the issue of rising real-estate prices, they want action to be taken, but they also need to know all the possible consequences of any actions, both good and bad. The last thing people need to hear is one-sided views and assessments offered by the government to cover up its capricious policymaking and knack for exploiting public opinion.
So far, some critics of the luxury tax say it will be slapped on anyone who resells non-self-use property within two years of purchase regardless of whether a profit was made. There are complaints that the tax will be levied on anyone no matter where they live, even though people in southern Taiwan have not been as troubled by high housing prices as those in the north.
In addition, the question about how the luxury tax would impact on the economy also deserves comprehensive government assessment: Not just claims saying the tax can generate about NT$15 billion (US$517 million) in revenue a year and that it would affect speculators only.
The fact of the matter is that the implementation of the luxury tax will hurt some people, while others will benefit. Allowing the government to simply focus on the positive side of the tax issue without addressing its downside illustrates a major problem in the government’s policymaking process. Any process that hails the positive while ignoring the negative will inherently lead to flawed policy.
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