The Ministry of Finance has at long last submitted the third draft of its combined housing and realty tax bill. However, Minister of Finance Chang Sheng-ford (張盛和) has shown bias toward the construction industry and property investors by openly declaring that tax reform needs to get realistic, which has caused concern and confusion in equal measure.
According to Chang, the first draft of the bill, which employed a progressive tax rate from 5 to 45 percent, was too idealistic. The bill was blocked by the Legislative Yuan, which stipulated a “sunrise clause” to avoid affecting 9.7 million households, saying, “If the sun is too hot, everyone will get burned.”
Thus, according to Chang, the third draft, which employs a flat rate of 17 percent in addition to the “sunrise clause,” has reached a consensus; this is why it was supported by the legislature. This reasoning is unacceptable.
First, the main reason for reforming the combined tax system was because previously, property taxation was not based on actual prices, which resulted in an artificially low tax base. This in turn led to a very low level of tax on the profits made from property transactions, which then resulted in real estate speculation. Conversely, reform of the tax system is now mainly concerned with restraining speculators, who make up approximately 20 percent of the market. Yet the vast majority of live-in home buyers and those unable to get a foot on the property ladder — approximately 60 and 20 percent, respectively — have not received any benefit.
This is why the ministry and various civil groups have proposed that live-in home buyers should be exempt from the tax. Why then, did Chang say that without the “sunrise clause,” 9.7 million owners would be affected? To mislead the public in this way to garner support for a combined housing and realty tax is clearly inappropriate.
Second, the principle of fair and reasonable tax reform is a concern for all. Since a progressive tax rate from 5 to 45 percent is applied to ordinary workers’ salaries, and even land value increment tax is from 20 to 40 percent, why is the combined housing and realty tax only 17 percent? Is this reasonable? Is it fair that, irrespective of how much money is made, the tax rate will be the same? Perhaps the ministry has plans for income tax to be levied at a flat rate too. Or could it be that the government hopes to use lighter taxation to further pump up the property market?
Third, by seeking to replace the so-called “luxury tax” — which charged owners between 10 and 15 percent of transaction prices — with the combined housing tax, which by comparison will take only 17 percent from the profit made on the transaction, the cost of short-term speculation will be greatly reduced. Should the government not be concerned this will create a new wave of property speculation? Is this the motive behind reform of the tax system?
Finally, Chang has stressed that this third draft is a moderate and gradual shift in tax policy that has achieved a consensus, and this is why the Legislative Yuan supports it. However, will a bill weighted in favor of the construction industry and investors convince the public? Will the Legislative Yuan willfully disregard public opinion by ratifying this bill?
The current third draft of the bill is incapable of achieving its original aim: The construction of a robust property market. On the contrary, this quasi-tax reform will only serve to further distort the market and deepen the feelings of anger and mistrust toward the government. It is hoped that policymakers within the higher echelons of government will seriously reflect upon this matter.
Chang Chin-oh is a distinguished professor of land economics at National Chengchi University
Translated by: Edward Jones
Recently, China launched another diplomatic offensive against Taiwan, improperly linking its “one China principle” with UN General Assembly Resolution 2758 to constrain Taiwan’s diplomatic space. After Taiwan’s presidential election on Jan. 13, China persuaded Nauru to sever diplomatic ties with Taiwan. Nauru cited Resolution 2758 in its declaration of the diplomatic break. Subsequently, during the WHO Executive Board meeting that month, Beijing rallied countries including Venezuela, Zimbabwe, Belarus, Egypt, Nicaragua, Sri Lanka, Laos, Russia, Syria and Pakistan to reiterate the “one China principle” in their statements, and assert that “Resolution 2758 has settled the status of Taiwan” to hinder Taiwan’s
Singaporean Prime Minister Lee Hsien Loong’s (李顯龍) decision to step down after 19 years and hand power to his deputy, Lawrence Wong (黃循財), on May 15 was expected — though, perhaps, not so soon. Most political analysts had been eyeing an end-of-year handover, to ensure more time for Wong to study and shadow the role, ahead of general elections that must be called by November next year. Wong — who is currently both deputy prime minister and minister of finance — would need a combination of fresh ideas, wisdom and experience as he writes the nation’s next chapter. The world that
The past few months have seen tremendous strides in India’s journey to develop a vibrant semiconductor and electronics ecosystem. The nation’s established prowess in information technology (IT) has earned it much-needed revenue and prestige across the globe. Now, through the convergence of engineering talent, supportive government policies, an expanding market and technologically adaptive entrepreneurship, India is striving to become part of global electronics and semiconductor supply chains. Indian Prime Minister Narendra Modi’s Vision of “Make in India” and “Design in India” has been the guiding force behind the government’s incentive schemes that span skilling, design, fabrication, assembly, testing and packaging, and
As former president Ma Ying-jeou (馬英九) wrapped up his visit to the People’s Republic of China, he received his share of attention. Certainly, the trip must be seen within the full context of Ma’s life, that is, his eight-year presidency, the Sunflower movement and his failed Economic Cooperation Framework Agreement, as well as his eight years as Taipei mayor with its posturing, accusations of money laundering, and ups and downs. Through all that, basic questions stand out: “What drives Ma? What is his end game?” Having observed and commented on Ma for decades, it is all ironically reminiscent of former US president Harry