TAIPEI — The government’s plan to impose a luxury tax this year faces strong opposition from the construction industry but wins support from some academics with one saying that the new tax could prevent a real estate bubble from building up before bursting eventually.
Most people in Taiwan own only one property, but some 20,000 wealthy investors have the financial resources to engage in speculative transactions, which has propelled skyrocketing housing prices, explained Deputy Finance Minister Chang Sheng-ford yesterday at a meeting called to ease the building industry’s anxiety over the proposal.
A draft of the statute of sales tax on special goods and services would be sent to the Executive Yuan, or Taiwan’s cabinet, for consideration next week at the earliest, Chang said.
He is confident that the new tax, which would also be imposed on expensive cars and some other luxury goods, would take effect in the second half of this year, he added.
Wang Ying-chieh, chairman of real estate developer Eastern Realty, said that the luxury tax would slow down transactions, which would be bad for the economy. If the tax is implemented, he said, it should be levied based on three principles.
He suggested that first, the tax should not apply to transactions in which the seller does not make a profit. Second, the statute should not be applied retroactively and third, there should be a “sunset clause” that would make the tax applicable only for a certain period of time.
While real estate developers are concerned about the tax proposal, some academics expressed approval, citing such reasons as social equality and prevention of a potential crisis in the property market.
Chang Chin-oh, a land economist at National Chengchi University in Taipei City, said that the measure could prevent Taiwan from becoming “the next Ireland,” where the bursting of a property bubble has had disastrous consequences.
Under the current proposal by the Finance Ministry, a 15 percent transaction tax will be imposed on owners of more than one house or apartment who buy and then sell a property within a year. If the owner sells a property owned for more than a year but less than two years, a rate of 10 percent will be applied.