President Chen Shui-bian's (
Chen has proposed that the capital gains tax be reduced for just "a year or two ... because it would take a heavy toll" on local tax revenues.
The goal of the reduction is to stimulate the sagging property market. Chen put forth the proposal earlier this week during a dinner party with DPP leaders of city and county governments.
Yen Ching-chang (
Because the capital gains tax on property sales generates revenue for both city and county governments, the central government may have to help make up any shortfall, Yen said.
"Total annual tax revenue from land transactions is more than NT$80 billion," said Sam Wang (
"Because the tax is levied by city and county governments, the tax cut would affect their tax receipts. Among them, Taipei City would be the most affected."
Under the current tax struc-ture, 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.
Some say reducing the capital gains tax wouldn't stimulate property demand, as the tax is levied on the seller, not the buyer. Others note that the tax is already low compared to international standards.
Currently, legislators are proposing that the tax rates be cut in half. That suggests that governments' tax receipts would be reduced to about NT$40 billion a year, finance ministry officials said.
Still, if the lower rates stimulate property sales as intended, that should have some beneficial effect for tax receipts.
Yen yesterday refused to comment on media speculation that the finance ministry favored a 10 percent cut. Yen said a final proposal has yet to be worked out by the ministry, legislators and local governments.
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