Lawmakers plan to halve the "land value increment tax," a type of capital gains tax unique to Taiwan, for homeowners planning to sell their property for the first time.
Currently, first-time home sellers pay a capital gains tax of 10 percent at the time a residential unit is sold.
Lawmakers want to reduce the levy to 5 percent over the next two years in an effort to give first-time home sellers a break and stimulate the slumping real-estate market.
Other property owners must pay a capital gains tax ranging between 40 percent and 60 percent -- although lawmakers have also been considering a proposal to slash those rates in half.
The measures are contained in draft changes to the nation's Land Tax Law, currently winding their way through the legislature.
Originally, the Ministry of Finance didn't want to halve the 10 percent tax, saying the rate was already low as it was designed to give first-time home sellers a break.
But pressure has been building to cut the rate, especially as the proposed cuts for other property owners are seen as benefitting primarily wealthy corporations.
By halving the 40 percent to 60 percent rate on capital gains, the "Ministry of Finance was targeting landowners and large real-estate groups, who would benefit tremendously from the tax cut," said Yophy Huang (黃耀輝), an associate research fellow at Chunghua Institution for Economic Research.
"It didn't consider the 85 percent of the public in Taiwan who just own a residential building or apartment," Huang said.
According to the Land Tax Law, the 10 percent rate is a once-in-a-life-time deal. After the first home sale, subsequent sales are assessed a rate ranging between 40 percent and 60 percent -- depending on the size of the capital gain.
Although lawmakers are likely to cut those rates in half, until now they hadn't considered lowering the rate for first-time home sellers.
Still, although the cut would provide some tax relief, Huang is skeptical over whether the move will boost the property market.
"The tax rate for owners of residential units will only be cut from 10 percent to 5 percent, which is unlikely to provide enough incentive for people" to sell their homes, Huang said.
"Chopping the land tax in half will mostly benefit landowners and large real estate groups," the academic said.
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