Taxation and Economic Development among Pacific Asian Countries

By Richard A. Musgrave; Ching-Huei Chang et al. | Go to book overview
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6
Property Taxation as a
National Policy Tool in Taiwan

Chuan Lin


1. Introduction

Property taxation in Tawain includes the house tax and the land tax. There are three types of land taxes: the Agriculture land tax (ALT), the land value tax (LVT), and the land value increment tax (LVIT). According to the law, landowners had to pay either the ALT or the LVT annually, according to whether their land was used for agricultural or nonagricultural purposes. The ALT, however, was suspended in 1987. The LVIT is a capital gains tax imposed on sellers of property when the title of the land is transferred.

In Taiwan, property tax laws, like all other laws, are legislated at the central government level. All local governments must abide by a common nationwide tax base and tax rate. Tax revenues are distributed among the various levels of governments according to the Fiscal Revenues and Expenditures Allocation Law. This law entitles county and municipal governments to 100 percent of the revenues from both the local house tax and the local LVT (or ALT), and to 60 percent of revenues from the local LVIT. The cities of Taipei and Kaohsiung are special, however, and are allowed to retain 100 percent of the revenues from the local house tax and other land taxes. Therefore, property taxes in Taiwan are not exactly local taxes as they are usually defined but are "central government designed" local taxes. Under this system, a local government in Taiwan has no choice but to accept the central government's local tax law and to apply it uniformly. This system further predetermines the level of tax revenues collected by the local government.

The system of centralized local taxation is obviously inconsistent with the "benefit rule," which stipulates that local public services should be provided efficiently The benefit rule requires each jurisdiction to decide

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