Wed, Aug 10, 2011 - Page 3 News List

Tax reform needs to be fair, panelists say

By Chris Wang  /  Staff Reporter

It is time to carry out tax reform that delivers social justice and wealth redistribution and a proposed property transaction tax could be a good first step, panelists told a forum yesterday.

“Taiwan’s taxation of property transactions, based on current assessed property or land value, fails to reflect market prices and the practice has played a role in increasing housing prices and the income gap between rich and poor,” Taiwan Thinktank chairman Chen Po-chih (陳博志) said.

President Ma Ying-jeou (馬英九) made a fundamental mistake in his philosophy on the subject, which could be seen in his remarks during the 2008 presidential campaign, Chen said.

“[Ma said] the solution will not be lowering housing prices, but to increase people’s income,” he said. “Ma forgot that the rise in housing prices always outpaces wage increases.”

Democratic Progressive Party (DPP) Chairperson Tsai Ing-wen (蔡英文), Ma’s main rival in January’s presidential poll, has proposed that taxation of property transactions be based on real transaction prices.

The new calculation format is the first step toward tax reform proposed by Tsai that would make capital gains tax — rather than income tax — the major source of government revenue and make wealthier people pay more tax.

The reform would not be “the second land reform,” nor would it have the intention of lowering housing prices, Chen said.

“The true objective is to achieve normalization of property transactions ... and to formulate a fair tax system,” he added.

Statistics show that the ratio of the number of property transactions to initial property registrations in Taipei City from 2006 through last year was more than 5.5, which meant that housing demand was more than five times the supply, said Chuang Meng-han (莊孟翰), associate professor at Tamkang University’s department of industrial economics.

In addition, there has been too much capital invested in the housing market, he said, adding: “The combination of the two factors is the main reason of the housing price increase.”

“There is no better time to implement tax reforms than now, since it would probably take more than 10 years to see the results. A well-planned tax reform will be able to achieve wealth redistribution,” he said.

Claims by the Ma administration that the real-estate transaction tax proposed by Tsai has already been implemented by the Ministry of Finance is a “flat-out lie,” said Tristan Liu (呂曜志), a Taiwan Thinktank consultant.

While under current regulations taxpayers must calculate their property transaction incomes based on last trading price — not the current assessed price — “in reality, we all know that no one calculates his or her income based on trading price,” Liu said.

One of the most important issues in tax reform will be transparency of the property trading system, which has been the norm in Western countries, he said.

“It will not be easy to do, but we have to start somewhere. The more transparent the trading system becomes, the more difficult it will be for someone to manipulate and abuse it,” Liu said.

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