Newspaper article China Post

Data Show Luxury Tax More a Failure Than a Success

Newspaper article China Post

Data Show Luxury Tax More a Failure Than a Success

Article excerpt

The luxury tax, which seeks to add tax revenue to the national coffers and drive down home prices, has failed to achieve those purposes as it has added only NT$3.26 billion to the treasury as of the end of April, far below the NT$15 billion the government had hoped it would bring annually, data from different sources showed.

At the same time, a home price decline that was hoped to come from the tax has not happened. In fact, prices in many areas have risen instead.

Miscalculation

The Ministry of Finance (MOF) in February last year announced its plan to levy the luxury tax to tame public anger over home prices that had spiraled out of control. The tax officially took effect on June 1 last year, an act that many thought would significantly hurt the home market.

The tax charges a rate of 10 to 15 percent on persons who sell their non-residential properties within two years of purchase to keep them from making a short-term gain, in the process driving up home prices. The government had expected the luxury tax, as well as another tax that charges 10 percent on luxury items such as top-class automobiles, would inject annual revenue of NT$15 billion into the national coffers.

But by the end of December 2011, the tax only brought in NT$2.08 billion, according to data released by the MOF. From January to April, it contributed another NT$1.18 billion, a total of NT$3.26 billion, or just 21 percent of the government's forecast.

Meanwhile, the tax was hoped to drive down home prices, with experts predicting a 10 to 20 percent decline after the tax went into effect. Yet, according to the polls by trade publication My Housing Magazine, pre-construction home prices in Greater Taipei have continued to increase, with unit prices averaging NT$800,000 a ping (3.3 square meters) in the first quarter in Taipei and NT$340,000 in New Taipei City, both breaking previous records.

As for used homes, prices grew 7 to 8 percent in both Taipei and New Taipei City over the past year, while prices increased by 10 percent in Taoyuan and 4 to 5 percent in the southern Tainan and Kaohsiung.

Southern Taiwan Recovery

Many had predicted that the southern Taiwan housing market would take a huge toll after the tax's implementation. …

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