Fri, Mar 11, 2011 - Page 1 News List

Cabinet finalizes luxury tax bill

SPECULATION:A minister said that the levy would stabilize rather than hurt the property market, with only an estimated 20,000 transactions affected

By Shih Hsiu-chuan  /  Staff Reporter

The Cabinet yesterday finalized plans to curb real-estate speculation by introducing a tax of up to 15 percent on the sale of properties — including residential, commercial or vacant lots not for self-use — and a 10 percent tax on luxury goods with a price tag exceeding NT$3 million (US$101,700).

Minister of Finance Lee Sush-der (李述德) told a press conference following the Cabinet meeting that the draft act on tax levied on specific goods and services (特種貨物及勞務稅條例) could come into effect on July 1.

SLOW DOWN

“The purpose of the bill is to slow down the frequency of property sales and address public discontent with rising commodity prices [partly] driven by consumption of high-priced products,” Lee said.

Lee said the implementation of the tax on the sale of non-self-use properties would stabilize the market rather than deal a blow to the real estate industry, because only an estimated 20,000 property transactions would be subject to the tax.

The draft act stipulates that owners of residential units, commercial units or vacant lots owned for less than one year, would be taxed 15 percent of the selling price, or 10 percent if they had owned the property for more than one year but less than two.

Article 5 of the draft act includes 10 exemptions.

Among them are situations when the seller owns only one property that is not leased out for business purposes; when the property is sold to the government or ordered by authorities to be auctioned off; and when an owner sells a property owned for less than two years within one year of buying a new one.

Owners would also be exempt when they sell property that was inherited or given to them and when they are forced by banks to dispose of property used as collateral to secure a mortgage or pledge.

Lee said the draft act also entitled the Ministry of Finance to make exemptions in certain cases as long as the transactions are made in accordance with the principles of “rationality, normality and non-voluntary transfer.”

The government also said it would impose a 10 percent tax on the sale of certain luxury goods, including vehicles, yachts, airplanes, helicopters and ultra-light carriers retailing for more than NT$3 million as well as furniture, goods made of turtle shell, hawksbill turtles, coral, ivory or animal fur valued at more than NT$500,000.

FINES

Lee said that sellers are responsible for reporting taxable transactions to authorities within 30 days and, under the draft act, people who evaded the tax would be fined three times the value of the tax they would otherwise have paid.

No sunset clause has been set to end the tax hike at a future date because the tax is designed as a perpetual normalizing measure to stabilize the housing market, Lee said.

Tax revenues collected under the act would be used to finance social welfare programs, Lee said, although he did not give an estimate of possible annual revenue.

Additional reporting by CNA

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