The Ministry of Finance (MOF) said yesterday that it was set to scrap land value tax exemptions for privately owned idle land, except that offered for public road use, effective from Jan. 1 next year.
The ministry’s move was apparently taken to deal with the worsening problem of land hoarding, which is seen as one of the major reasons behind the nation’s rocketing housing prices. It comes in the wake of the central bank’s recently unveiled credit -tightening measures.
“The cancelation of the preferential tax treatment is mainly aimed at achieving fair taxation rather than increasing tax revenues,” Deputy Minister of Finance Chang Sheng-ford (張盛和) told the Taipei Times by telephone.
“We didn’t calculate how much the nation’s tax revenues will grow [following the new regulation],” Chang said, although he added that scrapping the land value tax exemption could still increase the amount of tax income collected by the government.
The ministry’s announcement came after the Cabinet approved an amendment to Article 9 of the Regulations Governing the Reduction or Exemption of Land Tax (土地稅減免規則) on May 7, stipulating that only vacant lots for “public road use” will be exempted from land value taxes.
“The original regulations failed to restrict the scope of public use of vacant lots so that the preferential tax treatment was abused [by land owners], leading to a low utilization of property,” the ministry said in a statement yesterday.
Many owners of vacant lots turned their land into plazas, green spaces or parks for public use, which would have otherwise been used for other purposes, in order to be eligible for the land value tax exemption, the statement said.
Last week, the ministry issued a notice to local tax authorities, requesting that they begin investigating how many unused vacant lots receive preferential tax treatment in their jurisdictions ahead of the new measure taking effect next year.
This move was considered by many as an alternative way for the government to slap additional levies on unused land to contain rampant land hoarding by property developers amid rocketing housing prices in the Taipei area.
The ministry, however, said that the amendment was based on a resolution reached by the Tax Reform Commission in February last year in an attempt to preclude property speculation, stressing that it differed from the concept of imposing a “vacant lot tax.”
The land value tax is calculated based on the current valuation of land announced by local governments, with the rate ranging from one percent to 0.55 percent, the ministry said.
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