Private consumption is expected to continue growing this year and the newly proposed luxury tax is unlikely to dent consumer purchases, economists said.
The tax is intended to impose a 15 percent charge on real estate bought and sold within a one year period for speculative investment purposes, while a 10 percent tax is to be applied to those changing hands within two years, data from the Ministry of Finance indicated.
A 10 percent tax will also be levied on luxury cars, yachts and private aircraft with a price tag exceeding NT$3 million, while club memberships, designer furniture and fur products valued at more than NT$500,000 will not be exempted.
Although business representatives have said the levy could undermine the economy, economists remained confident that consumer spending would be largely unaffected.
“The levy will not influence economic growth as those items taxed only account for a very small proportion of private consumption,” said Tai Chao-yang (戴肇洋), a division director at the Taiwan Research Institute (台灣綜合研究院).
Although the amount of investment capital placed into the real-estate market by speculators might decrease, long-term -investors would focus on the bigger picture of national economic growth, Tai said.
“Even if some speculative capital leaves from the local market as a result of the tax, the impact will be limited, compared with the overall amount of consumer spending,” Tai said.
Wu Chung-shu (吳中書), an economic research fellow at Academia Sinica, also said private consumption would remain strong this year even if the luxury tax bill takes effect in the second half of the year.
“For people who can afford to buy those expensive items, the levy will not be the reason to stop them from making purchases,” Wu said.
However, Chen Miao (陳淼), director of the macroeconomic forecasting center at the Taiwan Institute of Economic Research (台灣經濟研究院), remained pessimistic about the economic impact of the luxury tax.
The imposition of a luxury tax would not have a negative influence on the economy, as the higher amount of tax would decrease average income, as seen in the US and several European countries, Chen said.
“The rising tax will decrease earnings, reducing people’s ability to spend,” Chen said.
Also, imposing the tax would shrink the value of assets for companies that own a lot of properties, like financial institutions, impacting their ability to invest or spend, driving down economic growth, Chen added.
The government currently expects private consumption to grow 3.85 percent this year, hitting a seven-year high, according to data issued last month by the Directorate-General of Budget, Accounting and Statistics.
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