Amended land tax bill attacked
THE NEW Land and buildings tax will fail to narrow the wealth gap between the haves and have-nots, according to a prominent economist.
Nipon Poapongsakorn, distinguished scholar at the Thailand Development Research Institute, said yesterday that the new tax bill approved by the Cabinet failed to address either income disparity or low revenue of local administrations.
The bill exempts too many land and property owners, as the tax will be imposed only on land and homes worth more than Bt50 million, he said. He suggested that tax exemption should be limited to only Bt10 million.
As the bill has been drafted, most of the middle class and the rich will pay no land taxes, he said.
This will also have a negative impact on the revenue of local governments that depend heavily on this kind of tax, he noted. Currently local governments such as tambon administrations have few tools to collect taxes to finance community development projects.
The 2-per-cent tax rate on vacant land is also too low, and the length of time specified in the bill to increase it to a maximum of 5 per cent is too long, Nipon said.
“It is the duty of people to pay taxes for the sake of their communities’ development, and the government should have campaigned for that,” he lamented.
Samma Kitasin, a board member of the Secondary Mortgage Corporation, said the change in the revised draft approved by Cabinet on Tuesday that got the most attention was the tax rate of 2 per cent for unused land, increasing by 0.5 percentage point every three years until capped at 5 per cent.
The previous draft had the same ceiling but a quicker increase from the base rate. It would have levied 1 per cent for three years, 2 per cent from the fourth to the sixth year, 3 per cent for the seventh year, and eventually rise to 5 per cent.
“The new rate will take 18 years to reach 5 per cent, allowing owners to adjust,” Samma said.
The planned date for the tax to go into force, January 2018, is also one year later than the launch date specified in the previous draft, he said.
The maximum tax rate for agricultural and residential use is 0.2 per cent annually, with the rate applied to land with a value exceeding Bt50 million, while the maximum rate applied to commercial land is 2 per cent.
Meanwhile, Prasert Taedullayasatit, president of the Thai Condominium Association, believes the impact on homeowners will be minimal. Only about 100 residences worth more than Bt50 million are sold each year.
The real-estate industry will both win and lose from the new law, he said.
On the negative side, the tax will dampen demand for new inner-city condominium projects. He estimates that demand for condos as second homes is about 40,000-50,000 units per year.
“More and more people living in the outskirts of Bangkok buy city condos as their second home. This tax will add to their financial burden and may affect second-home demand and the property market as a whole,” he said.
Condos now account for about half of all residential units launched each year.
On the plus side, developers can anticipate the release of more sites by landlords, he said.
The property market is being driven by low interest rates currently.
The Cabinet will forward the revised bill to the National Legislative Assembly for debate. The assembly is expected to approve it by September, NLA President Pornpetch Wichit-cholchai said yesterday.
A previous study suggested that few Thais hold large land plots, with only 837 of them holds plots of more than 1,000 rai (160 hectares). While the majority 3.48 million people or 22 per cent, each holds between one to five rai of land only.