Premier Jiang Yi-huah has promised to go after capital gains on property sales in the government’s new tax reforms. He made the comments on Wednesday at a forum with scholars from Academia Sinica, which is Taiwan’s top research institute.
Under the existing tax system, when a property is sold in Taiwan, a “land value increment tax” is imposed based on the difference between the government-assessed value of the land when it was bought and when it was sold.
However, the government-assessed values are mere fractions of the actual market value, and only the value of the property’s land is considered. The tax burden is extremely low compared with the actual gains. Many people believe that the extremely low effective tax rates on income from property sales have contributed to soaring housing prices.
The premier spoke about the future direction of tax reforms.
"The other day I consulted with the finance ministry and other ministers, and in principle, we will work towards taxing the sale of a property as a whole, [instead of separating the land and building components,] and taxing the actual amount [rather than the government-assessed one]," said Jiang.
"This policy will prevent tax avoidance by shifting the capital gains from [land to properties], and will bring our property taxes in line with international practices," he said.
The premier said he expected that property speculators and developers would fight the initiative. But he said he believed that reforms would eventually succeed, because the public supports a fairer tax system.