Fri, Feb 13, 2015 page13

• Ministry unveils capital gains tax plan

  ALIENATION? Shining Group chairman Lai Cheng-i said proposed levies targeting foreign property investors would hurt government plans to attract foreign investors

  • By Crystal Hsu / Staff reporter
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  The Ministry of Finance yesterday unveiled an income tax plan that seeks to impose heavy taxes on capital gains from property transactions, but spares low and middle-income earners.

  Under the draft bill, which needs to clear the legislature, property gains from homes sold for NT$40 million (US$1.27 million) or more are to be subject to a 17 percent income tax, Minister of Finance Chang Sheng-ford (張盛和) said.

  The tax rate will climb to 30 percent on houses sold within two years of purchase or intended for investment purposes, Chang said.

  “It is unrealistic to expect the income tax plan to remedy all longstanding social problems,” Chang said.

  Rather, the plan aims to address the nation’s overly cheap property taxes as based on government assessments of property values, the minister said.

  Since assessed values are much lower than market prices, existing property-related taxes do not discourage property speculation, Chang said.

  The taxable threshold of NT$40 million falls in line with the central bank’s definition of luxury homes, the main target of the new income tax, the minister said.

  As most homes in Taiwan have a value below the threshold, an overwhelming majority of home owners will not be affected by the tax, which the ministry expects to enact next year.

  There are on average 350,000 property deals a year, and the tax might affect only 5,251 cases in the first year, accounting for 0.05 percent of the nation’s 9.74 million households, Chang said.

  Furthermore, the tax will not affect deals for homes acquired before December last year, the minister said.

  “Tighter tax terms would meet with great resistance given that 85 percent of houses in Taiwan are for self-occupancy,” said Chang, who is known for being pragmatic yet persistent in pushing controversial policies.

  The national treasury might suffer a bit in the first two years, but it will see more tax revenue in following years, the minister said.

  The government will use the extra revenue to support its long-term care program and home purchases by young people, Chang said.

  While lenient on middle-income home owners, the ministry proposes a 30 percent income tax on short-term property speculators and foreign investors.

  That is higher than the current special sales levy that subjects houses resold within two years of purchase to a maximum 15 percent tax on trading prices.

  The special sales levy, better known as the luxury tax, will be retired once the income tax on property gains takes effect, Chang said.

  “The government is not interested in chilling the property market, which might hurt the financial and other sectors,” he said.

  Instead, it is seeking to discourage speculation, which has pushed housing prices up, especially in Taipei and New Taipei City, the minister said.

  Homes for self-occupancy are also free from the tax, Chang said.

  The proposed income tax will not apply to farmland or farm houses, he said.

  Shining Group (鄉林集團) chairman Lai Cheng-i (賴正鎰), who also heads the General Chamber of Commerce, voiced objections to the plan, saying it would hurt the economy.

  The proposed 30 percent income tax on foreign property investors runs counter to the government’s bid to attract foreign investments and professionals, Lai said.

  There is no need to cool the property market, as soaring land and building material prices are driving developers to adopt a cautious expansion strategy, he added.
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