Taiwan is considering a new property tax on real estate sold within a year of purchase and plans to revise land valuation rules to further quell the risk of overheating in its property market.
Government officials said that the tax will be aimed at investment properties and not at ordinary buyers who want a home for their own use. Land valuations will also be revised more regularly to ensure taxes reflect market changes, said Wang Ching-hsiu, a deputy director of the Interior Ministry.
It is hoped that the new tax will discourage short term investors from speculation in the property market and could help curtail prices. But some commentators are sceptical as previous credit tightening measures have failed to curb real estate prices.
At the end of September Taiwan’s central bank increased its benchmark interest rate by 0.125% for the second time this year after a jump in real estate prices fuelled concern that the Asian island’s economic recovery could create a property bubble. Prices in the capital rose 7% from December 2009 to the end of September, according to Stanley Su, an analyst at Sinyi Realty, Taiwan’s biggest real estate brokerage.
The government is studying the tax and no date has yet been given for when it will be introduced. ‘We hope this would discourage speculation,’ said Ching-hua Lee, chief secretary at the Ministry of Finance.
The tax on property sales could be as high as 30%, the Taipei based Economic Daily News reported, citing an unidentified official at the Ministry of Finance. Lee said the ministry hasn’t decided on the tax rate.
Taiwan also plans to revise its so called published property values every year starting as early as the second half of 2011, said Wang, who works at the Interior Ministry’s land department. The benchmark for annual real estate taxes is now revised every three years.
The declared land values, used to calculate taxes on the increase in the worth of properties, will be revised when necessary to bridge the gap with current market prices, she said. Those valuations are now revised yearly.
‘We will act to enhance taxation fairness as investors who buy and sell land within the same fiscal year won’t be taxed against gains under current land value increment tax rules,’ Wang added.
Plunging interest rates drove prices of residential property in the greater Taipei area up by 20% last year, according to Sinyi Realty. The increase in property prices has made it more difficult for first time buyers to purchase properties. Some eight banks partially owned by the government, hae been asked to offer $6.6 billion worth of mortgages at lower interest rates for buyers aged between 20 and 45.
