New tax law may give better control

The drafted law proposes to impose a maximum annual tax of 0.5 per cent based on current property valuations, with the tax rates varying based on the type of use. Residential properties will be charged no more than 0.1 per cent of the valuation and farmland will be charged at no more than 0.05 per cent.

Undeveloped land will be charged at 0.5 per cent, but the tax rate for undeveloped land will be doubled every three years up to a maximum of 2 per cent of the valuation if it remains undeveloped.

The purpose of the property tax is to finance local administrations that provide services to properties.

Those who own properties that use more local services would be charged at a higher tax rate such as commer¬cial buildings. This makes a lot of sense.

The tax also provides incentives to encourage the best use of land within the infrastructure provided. The tax discourages those who want to occu¬py undeveloped land for speculative purposes as it imposes a holding cost.

The impact on the realestate industry can be huge.

The approval of the draft will result in the cancellation of existing taxes to prevent double taxation and provide consistency once the new property tax is introduced.

This would mean cancellation of the existing specificbusiness tax, transfer fee and the current property tax of 12.5 per cent imposed on rental property.

In addition, the draft implies giv¬ing more power to local authorities, intending to allow better efficiency through local optimisation and decen¬tralisation.

However, a control system needs to be put in place.

The proposed draft has been pend¬ing for more than 10 years due to fierce opposition from political parties and those who think they may lose their benefits.

In addition, since the new proper¬tytax system requires many addi¬tional processes and human resources in order to be successfully imple¬mented, it will take a while to bring about change.