Property taxes should be increased by raising official assessment values, academics said yesterday, blaming a decades-long assessment freeze for weak local-government finances.
“The current tax structure is extremely strange because of low property taxes,” said National Chengchi University economics professor Steve Lin (林祖嘉), a former National Development Council minister, at a Legislative Yuan news conference.
He said the nation’s overall tax burden of 13 percent of GDP was extremely low by Organisation for Economic Co-operation and Development (OECD) standards, even though the nation has some of the highest individual income tax brackets among OECD states.
“The main reason for this is because the government collects less for other taxes, including property taxes,” he said. “On average, a [Taipei] home with a market value of between NT$10 million and NT$20 million [US$319,224 and US$638,447] would be taxed NT$5,000 per year, while licensing fees for a car worth NT$1 million are more than NT$10,000.”
“This situation is the result of 30 years of stupid inaction,” China University of Technology College of Business dean Tseng Chu-wei (曾巨威) said, adding that the “standard construction costs,” which serve as the basis for assessed value, have not been adjusted in more than 30 years in most cities, with the exception of a 160 percent increase in Taipei in 2014.
The current formula for assessed value multiplies on building’s “standard construction costs” by a depreciation value based on its age, after multiplying the value by a “sector adjustment rate” to take into account the value of its location.
Construction costs have increased more than five-fold since current “standard construction costs” were set 30 years ago, Tseng said, attributing low assessment values for the nation’s low property tax revenues, which he said comprised only 0.88 percent of GDP, compared with an average of 1.8 percent for OECD countries.
The low tax base has squeezed the budgets of local governments, whose tax revenues only comprise 70 percent of total budget needs, with national government subsidies and borrowing making up the difference, he said.
He called for asset values to be increased to reflect actual market value while allowing local governments to offer “discounted” taxation rates to attenuate the market shock, also calling for the integration of land and property taxes to prevent double taxation.
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