Fixing land tax
The Ministry of Finance is reportedly planning to amend the combined capital gains tax for housing and land sales in an attempt to address housing speculation.
The proposed method is to extend a one-year capital gains tax window, meaning a 45 percent tax on housing and land sold within two years of purchase.
The tax would also be applied to domestic legal entities to prevent investment firms from speculating.
Heavy taxation on housing speculation is feasible, but not perfect, because it can be bypassed by setting up an overseas company. In other words, the policy would catch the small fry, but let the big fish off the hook.
High capital gains taxes on housing and land sales will not increase supply, and is therefore not the best way to suppress prices. Because speculators can avoid taxes by delaying reselling, it will reduce supply, and as demand would remain unchanged, prices would go up.
That might mean that it would be impossible to suppress speculative demand.
These views are intended to highlight the relationship between policy methods and goals, not to block the proposed amendment.
In the long-term, the proposal would increase tax revenue and suppress small-scale speculation.
However, effectively eliminating speculation requires other methods, such as taxing property ownership through land and housing levies, as well as a hoarding tax, to force speculators to sublet or sell empty housing.
Lee Chi-sheng
New Taipei City
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