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Talk of the Day -- Luxury tax falls short of expectations

2012/05/28 23:11:27

Nearly a year after the introduction of luxury tax, the government has so far collected NT$3.39 billion (US$114.92 million) in luxury tax, far short of the originally targeted annual amount of NT$15.1 billion, according to official statistics.

Despite its limited contributions to tax revenues, the Ministry of Finance (MOF) said the luxury tax has truly help rein in speculative housing transactions.

The results of an opinion survey conducted by Want Want China Times Group show, however, that only 7 percent of the respondents fell local housing prices have dropped since the implementation of luxury tax.

The poll also found that roughly 60 percent of those interviewed said the effects of the luxury tax fall short of their expectations.

The following are excerpts from the local media coverage of mixed views on the impact of luxury tax:

Commercial Times:

Finance ministry officials said the luxury tax is not aimed at increasing tax revenues, but rather at stamping out speculative property transactions.

Citing statistics released by the Ministry of the Interior, the ministry said the number of houses traded in metropolitan Taipei and New Taipei has declined significantly since the launch of luxury tax, indicating that the government's goal of averting speculative property transactions has reaped initial fruit.

More encouraging is that the housing transaction drop rate in the two cities is even steeper than the national average, a finance ministry official said.

However, former Finance Minister Lin Chuan said the luxury tax has so far only discouraged short-term speculative housing trade, but has failed to help drive down property prices.

Under current regulations, luxury tax is only applicable to houses that are sold within two years of purchase.

"I have forecast from the very beginning that the ministry-designed luxury taxation system cannot have any real impact on property market because relevant provisions can hardly deal any blow to housing speculators with deep pockets," Lin said.

In the first four months of this year, the government collected NT$1.18 billion in luxury tax, but the national coffers saw a NT$5.3 billion decrease in land value increment tax revenues, according to official statistics.

Land developers said the luxury tax is a failed policy because it has led to a 30 percent decline in property transactions while failing to push down housing prices.

"The government's tax revenues have plunged due to decreased property transactions, but housing prices in many urban areas have not fallen and many local people still cannot afford to buy their own homes," said a land developer who declined to be identified.

According to the Want Want China Times Group poll conducted on 1,301 randomly chosen adults on May 22, 85 percent of the respondents said they cannot afford to buy their own homes and 49 percent said the luxury tax cannot help boost housing justice or social fairness.

The poll also found that 36 percent of those interviewed remain unaware of the introduction of luxury tax. (May 28, 2012).

Economic Daily News:

President Ma Ying-jeou's inauguration to a second term in office on May 20 has not helped promote sales of luxury houses in northern Taiwan, according to real estate brokers.

Property agents in the southern metropolis of Kaohsiung also said that short-term speculative housing transactions have cooled down in the region.

In contrast, property agents in central Taiwan said pre-sales of luxury houses have in Taichung City have remained robust over the past year. (May 28, 2012).

(By Sofia Wu)