Cabinet to take on property taxation

The Cabinet during its weekly meeting today will take up the issue of the "land value increment tax," a capital gains tax for property transactions.

Premier Chang Chun-hsiung (張俊雄) said yesterday that the Cabinet would consider a proposal to do away with the levy, which can be as high as 60 percent on the capital gains of a property when it is sold.

In addition, Chang yesterday reprimanded a Cabinet member -- without mentioning his name -- for making official comments on the tax before the government had announced its intentions.

"Some finance officials have made comments on the Cabinet's policies without being authorized, which is very inappropriate," the premier said yesterday.

On Monday, Minister of Finance Yen Ching-chang (顏慶章) said that his ministry would prepare several tax-cut proposals for the legislature's review by Sept. 12.

Chang said that when Cabinet officials issue conflicting statements, it can create the perception that the government has flip-flopped on its own policies.

"As a matter of fact, the government has not yet decided to revise its policies," Chang said, adding that the Cabinet should avoid "issuing an order in the morning while rescinding it in the evening (朝令夕改)."

Under the current tax structure, on a property sold with a 100 percent capital gain, the gain is taxed at a rate of 40 percent. If the capital gain is between 100 and 200 percent, property sellers must turnover 50 percent of their gain in taxes. For a 200 percent capital gain, the rate is 60 percent.

Proponents of the tax cut say it would help stimulate property sales, though critics say the reduction would only benefit the wealthy.

City and county governments also oppose any reduction in the capital gains tax, as proceeds from the levy go into their coffers.

Earlier this year, finance officials said that an across-the-board, 50 percent reduction in the land transaction tax would result in a loss of NT$40 billion a year for local governments.

Yen on Monday said the finance ministry was mulling permanently reducing the top rate from 60 percent to 40 percent.

Another idea, he said, was to cut rates by half across the board for a period of two years.

Still another proposal is to allow local governments to decide the size of the cut, allowing them to reduce rates by up to 30 percentage points.

Whatever tax-cut proposal the government adopts, Yen said the central government should find ways to make up for the lost revenue to local governments.

Despite the premier's warning to keep mum on the issue, Vice Minister of Finance Sean Chen (陳沖) said yesterday that lowering the top rate to 40 percent seemed reasonable.

Chen argued that the capital gains tax rate for property sales was too high, and should be brought in line with the 40 percent top rate for income taxes.

KMT Legislative Yuan speaker Wang Jin-pyng (王金平) yesterday described the tax-cut proposal as "a fait accompli" and said the "Cabinet has to follow and act on it."