MOF to respond to lawmakers' plan for land value tax cuts

Taipei, March 18, 2003 (CENS)--The Finance Committee of the Legislative Yuan yesterday took the initiative to approve a plan that would extend current 50% slash in tax rates on increases in the value of land by another year to January 2005.

The move would offer more generous terms to taxpayers than a proposal being contemplated by Finance Minister Lin Chuan. The Ministry of Finance is expected to express its opinions for acquiescence or present an alternative proposal.


Legislator Yang Chiung-ying of the opposition Kuomintang said the extension of the tax reduction was necessary to help stimulate the flagging real estate market as various economy-stimulating measures implemented by the government have failed to bring forth economic recovery.

Citing figures compiled by the Ministry of the Interior, Yang said that a total of 654,745 land parcels changed hands in 2002, representing an increase of 26.4% from the previous year. However, she pointed out that the increased number of transactions had not seemed to have any effect on the recovery of the realty market.


Other lawmakers on the panel also said that in spite of increasing property transactions, the real estate market remains in a slump. At a time when the unemployment rate remains at a high level, they said, there is a necessity to prolong the steep sharp cut in the tax rates on the increase in land value. They added the tax breaks need to remain in place in order to further stimulate activity in the market.

The Legislative Yuan had ratified the Land Tax Law proposed by the Executive Yuan to halve the land incremental value tax rates of 40%t, 50%, and 60% depending on the value of the land for a two-year period until January next year. The ongoing effective tax rates are 20%, 25%, and 30% in three grades.

Minister Lin said the MOF is working on a plan to continue the incentives on property trading with direct tax rates of 20%, 30%, and 40%. Implementation of the new rates could be advanced to January next year.

Vice Finance Minister Wang The-shan said he will have to make a report to Minister Lin and make a formal response, probably today, to lawmakers' offer of greater incentives.

Although the measure proposed by the legislative committee is still subject to discussion and final approval at plenary legislative sessions, the MOF is widely expected to accept the panel's decision unless it presents solid reasons for the unfeasibility of the proposal for lower tax rates.

By extending the current tax breaks by another year, officials said they hope to avoid artificially affecting the market and give it a chance to climb out of the downward slide that began during the 1990s. The move conforms with President Chen Shui-bian's repeated vows to revive economy and sweeter tax incentives always help win more ballots in elections in Taiwan.

Whichever the final decision, some MOF officials said new actions must be taken. They are concerned that having the current tax breaks run out at the beginning of next year could have negative effects on the market. It could prompt land owners to rush to sell their land before January in order to benefit from the tax breaks.

But knowing that both the legislative and executive branches are hoping to lower taxes on land in the near future would give land owners incentives to wait until the new measures are passed before selling their property. The combined effects of these two incentives could shift the real estate market to a dormant situation if both buyers and sellers adopt a wait-and-see attitude.