CEPD backs property tax on market prices

Several lawmakers of both the ruling Kuomintang and the opposition Democratic Progressive Party voiced concern that the prolonged low interest rates have induced business conglomerates and speculators to channel more funds into the realty market, lifting the prices out of the touch of the general wage earners.

They suggested the government to at least ask the state-owned banks to divide the mortgage interest rates into several brackets with higher rates on loans for luxury housing units.

Tsai said the participants of the two CEPD meetings on real market issues last year generally held the view that realty prices in Taipei City/County are comparatively higher while other markets in Taiwan are not a major problem.

But the scholars attending the meeting suggested an overhaul of the property tax structure to help dampen market speculation, including lowering the tax for housing units used by taxpayers themselves, raising the tax on non-resident units, and charging capital gains tax according to property transaction prices rather than the prices designated by the government.

Tsai said that these are just some proposals at current stage. But he also stressed that he personally backs such suggestions which will come under consideration.

He explained that the poor-rich gap in Taiwan had long stayed at only 4 times, but the income gap between the highest echelon and the lowest bracket has widened to 6.2 times in recent years.

Tsai expressed the scholars' view that one of the factors for the widening gap was attributed to the low cost and low tax of amassing properties that also helped create “artificial demand” and rampant speculation.

Governor Perng Fai-nan of the Central Bank of the Republic of China (Taiwan) just advised state-run banks recently to tighten lending risk management as the property prices continue soaring.

Responding to lawmakers' questions yesterday, Finance Minister Lee Su-der said he felt that banks should be more cautious when offering loans for luxury properties which he classified as housing units commanding prices exceeding NT$50 million.

He promised to relay the legislators' concern over the rising property prices to government-owned financial institutions that are under the supervision of the Ministry of Finance.

A senior executive of Sinyi Realty Co. said the speculation on Taiwan's real-estate market can be effectively checked if the government transforms the scholars' suggestions into policies.

But such policies could also dampen the housing market in the long-term, he said.

Some market analysts said that officials have to demonstrate tremendous guts to implement a policy of levying capital gain tax according to property market transaction prices instead of based on the prices designated by the government, which is much lower than real market prices.

They pointed out the fact that former Finance Minister Wang Chien-shien, who presently serves as president of the Control Yuan, was forced to step down in 1992 after announcing a plan to take the same step due to pressure from realty developers and politicians.

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