The Taipei Times wrote up a short piece on potential changes to the property tax laws to "curb property speculation"...
Taipei Deputy Mayor Chang Chin-oh (張金鶚) yesterday met with Minister of Finance Chang Sheng-ford (張盛和) to discuss the high housing prices, after Premier Jiang Yi-huah (江宜樺) vowed to reduce the home price to income ratio in the Greater Taipei area from 15.01:1 to 10:1 in two years.Note in that third paragraph the two salient points: (1) tax rate to jump up to 3.6% and (2) accurately defining what it means to self-use a residence. The skill lies in the second; it will be relatively easy for homeowners to evade this milequetoast tax rise simply by redefining their own residency.
“Under the cooperation established between the central and local governments, we are confident that the average cost of a housing unit [in the region] could be reduced by one-third in two years,” Chang Chin-oh told a press conference after leaving the ministry.
The two sides have agreed to expand the interval of the home tax rate on non-residential properties up to 3.6 percent and stipulate a more accurate definition of what constitutes self-use residences (properties not occupied by the owner).
Currently, local governments determine their own housing tax rate and all of them have adopted a rate of between 1.2 and 2 percent of a residential property’s value, which is the range set by the central government.
The real issue, as always, is that the assessed value has remained the same since 1987. Recall this piece from the excellent mag Commonwealth:
Land in Taiwan has four different values. Aside from the actual market price, there is the "publicly announced land value," which is adjusted once every three years, the "reported current land value," which is the value reported by landowners used to calculate the land tax and can be up to 20 percent higher or lower than the publicly announced land value, and finally the "assessed present land value" on which land value increment taxes (similar to capital gains taxes) are based.and of course...
Taiwan's houses also have two prices -- the actual market price and a "standard unit price for housing construction" set by the tax revenue offices of each local government for residential units under their jurisdiction. This publicly assessed price has not been adjusted for 27 years. Legislator Lai Shyh-bao estimates that the current "standard unit price" is roughly only one-fifth of the actual market value.
"Taiwan is the only country in the world that uses an assessed present value to calculate housing and land taxes," says the economist Ma Kai. The publicly assessed land and house value usually seriously understates actual market values. "The Palace's apartments are publicly valued at only NT$3 million to NT$4 million," Ma says of the luxury property that reportedly has sold its units for up to NT$ 70 million.
Another Commonwealth piece observed:
On a profit that was in fact NT$82 million but assessed by the government at NT$15.25 million, the investor paid a land value increment tax of NT$3.05 million, an effective tax rate of 3.71 percent. Even when deed taxes and other fees are added, the investor's tax liability was still under NT$4 million, or lower than 5 percent, the lowest marginal rate on personal income taxes.You can see the problem. The additional tax on non-occupied residences is a fleabite because it doesn't address the real issue, the disparity between the assessed value and the actual value that has remained unchanged since 1987. That disparity is driving the enormous housing bubble in Taipei, an alternate universe of unreal values, spinning off still further alternate universes of housing price bubbles like a bad SF horror movie in other locations in Taiwan.
Still, that bubble of construction and "investment" is probably driving a large part of GDP and thus, no government can afford to prick that bubble. If Ma really wanted to screw the DPP, he'd raise the assessed value on real estate to current levels as his last act in office, but his Administration is owned and operated by the 1%, so don't look for that to happen.
Commonwealth also takes a look at the proposed tax reforms to make up the government's fiscal shortfall. I have a lot of respect for that mag: they produce a ton of useful articles on taxes and on economic growth and economic and finance policy. And they don't subscribe to the fiscal and economic insanity that lowering taxes on the wealthy produces economic growth.
Finally, a couple of weeks ago the 104 Job Bank, Taiwan's most important, produced data showing that average wages for first time job seekers fell below $30,000 NT a month. Other reports set the sum even lower, at 22K, a sum that was the butt of sardonic jokes during the occupation of the legislature. The 104 Job Bank also showed that average real wage is $44,739 for 2013, lower than the real average wage of $44,798 for 1998. Yet prices, the article notes, have risen 10% since then.
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