Amid public complaints about soaring property prices, the Taipei City Government said on Tuesday it would raise taxes on luxury apartments starting in July next year, with other cities and counties expected to follow suit. This “solution,” however, fails to address the critical problem of lack of affordable housing and at most, would only make a small dent in the income of owners of high-end properties.
Take a 245 ping (800m²) apartment at the upscale Treasure Palace complex in Taipei as an example, where the owner currently pays an estimated NT$150,000 in annual property taxes. Under the new regulations, wherein property taxes could rise by as much as three times, the owner will have to pay NT$450,000 starting next year. This is merely a drop in the bucket for owners who can afford to pay between NT$150 and NT$170 per ping per month, or nearly NT$500,00 per annum, in property management fees.
The tax hike also represents a disproportionately small rise compared with the surge in the property’s value, which has doubled to around NT$400 million since 2006, and could climb another 30 percent once Taipei signs an economic cooperation framework agreement (ECFA) with Beijing by the end of the year if domestic realtors’ forecasts hold true.
Even if the property’s value were to see only a minor 10 percent rise by the end of this year, a capital gain of NT$40 million from selling the property would still enable the owner to pay the city government’s new tax for another 100 years.
In the interest of equitable taxation, it is reasonable then for the city government to take back a small share of the property boom expected from President Ma Ying-jeou (馬英九) administration’s pro-China policies.
To promote a fairer tax system, some have called for the Ministry of Finance to impose a higher tax rate on incremental capital gains from high-end properties, although opponents of this proposition argue that this would hurt domestic consumption.
Other than tackling soaring high-end property prices, however, the government has failed to address more urgent issues that affect the general public.
Middle-market properties have also shot up in the past year on expectations that the ECFA would lift the economy. This is an issue that the government should have prioritized, but it has not provided any concrete measures except for plans to build an affordable housing project in Linkou (林口) in four years.
Debate is still raging on whether middle-income earners will benefit from signing an ECFA with China. Even if they do, the gains they make may not be enough to allow them to catch up with the soaring value of real estate. And their housing plight will only worsen if the ECFA undercuts their jobs and hurts the local economy.
The nation’s low-income families are the most vulnerable to the Chinese trade pact or any property boom. If the government is hoping that an ECFA would bring about a property boom similar to what happened in Hong Kong after it signed a closer economic partnership arrangement with China in 2003, it had better think ahead how it could keep the low-income families from further plunging into poverty as happened in Hong Kong, where 1.23 million people — or nearly 18 percent of its population — were living below the poverty line as of the first half of last year.
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