Actual Selling Price Property Taxation Will Ensure Justice in Housing
China Times editorial (Taipei, Taiwan, ROC)
December 14, 2011
Summary: President Ma Ying-jeou recently issued a mobilization order concerning five "Justice in Housing" bills which were finally passed by the Legislative Yuan yesterday. These bills deserve our applause. But the five Justice in Housing bills are merely the first step. We still have a long way to go before "Actual Selling Price Property Value Reporting" and "Actual Selling Price Property Taxes" become a reality. Only the implementation of Actual Selling Price Property Taxes can ensure Justice in Housing. Therefore the ruling and opposition parties still have much work to do.
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President Ma Ying-jeou recently issued a mobilization order concerning five "Justice in Housing" bills which were finally passed by the Legislative Yuan yesterday. These bills deserve our applause. But the five Justice in Housing bills are merely the first step. We still have a long way to go before "Actual Selling Price Property Value Reporting" and "Actual Selling Price Property Taxes" become a reality. Only the implementation of Actual Selling Price Property Taxes can ensure Justice in Housing. Therefore the ruling and opposition parties still have much work to do.
The five Justice in Housing bills include Real Estate Brokerage Management Regulations, Land Laws, Equalization of Land Rights Regulations, Land Acquisition Regulations, and the Housing Act. The first three bills pertain to Actual Selling Price Property Value Reporting. They require actual selling prices to be reported within 30 days after real estate transactions. The amended Land Acquisition Regulations pertain to land acquisition at Actual Selling Price Property Values rather than listed prices. The Housing Act draft law states that a certain percentage of social housing must be rental and not for sale, to ensure sufficient housing for disadvantaged members of society.
In order to achieve Justice in Housing, President Ma has incorporated this plank into his Golden Decade campaign platform. Real estate transaction amounts must be accurately reported. Property taxes must reflect actual selling prices. DPP Chairman Tsai Ing-wen has incorporated this item into her Platform for the Coming Decade. Property taxes for residential property not occupied by the owner will be taxed in stages, based on selling prices. Land taxes and housing transaction taxes will be combined into a single real estate transaction tax. The five bills virtually ground to a halt in the legislature. Private sector organizations wondered whether the ruling and opposition parties were serious.
Today however, under President Ma's leadership, the five bills passed, one day before the legislature adjourned. They came through on their promise to voters. The Housing Act states that social housing must constitute at least 10% of all rental housing for low-income households, for those over 65 years old, and for the handicapped. Finally, disadvantaged members of society enjoy basic protections. The more controversial Land Acquisition Regulations amendment still needs to clear the Executive Yuan. Input from farm groups was included in the final result. But farm groups still cannot accept certain aspects of the amended regulations pertaining to the abuse of eminent domain.
Fortunately all five bills passed. That however, does not mean that Justice in Housing will immediately become a reality. The Real Estate Brokerage Management Regulations and three other laws must also be amended. This is merely the first step toward Actual Selling Price Property Value Reporting. At this stage Actual Selling Price Property Value Reporting is not the same as Actual Selling Price Value Disclosure. According to the version passed by the Legislative Yuan, licensed real estate brokers, consignment sellers, and local governments must remove the house number, lot number, building number, sign the contract, transfer ownership, and register the transaction with the responsible government agencies within 30 days. When the average price of real estate in the district is announced, the disclosed price for individual housing units will no longer reflect selling prices. They will have departed significantly from the selling prices.
For years, real estate taxes have not been levied on the basis of selling prices. Opportunists and real estate speculators have paid little in taxes. This contributes to soaring housing prices. It also contributes to the widening gap between rich and poor. According to a Control Yuan survey, the super rich can buy and sell luxury condos, making profits amounting to 173 million dollars. Consider their own residences. Land taxes and housing transaction income taxes may amount to one million dollars. But the tax burden is merely 1%, How can the public countenance such an unfair tax system? Change is inevitable. The Legislative Yuan has just passed a bill taking the first step toward Actual Selling Price Property Value Reporting.
The ruling party has made a genuine effort to curb soaring housing prices. But it must do more. Consider the Luxury Tax implemented on June 1. At the end of November the Ministry of the Interior announced its "Survey of Third Quarter Trends in Housing Demand." The ratio between real estate prices and incomes on Taiwan is now 9.2 to one, higher than last quarter. In Taipei the ratio is 14 to one. To be able to afford a house, people have to give up eating and drinking for 14 years. These numbers show that the Luxury Tax has yet to significantly reduce housing costs. Now that the Luxury Tax is being levied, more people are giving gifts. Many speculators are using gift giving to transfer property to others to sell it. This enables them take advantage of lower gift tax rates, and avoid higher luxury taxes. No wonder the Luxury Tax has been ineffective.
Any reform will inevitably be met by a backlash from vested interests. If one backs down merely because one encounters a backlash, people will soon see right through you. When President Ma issued his mobilization order, the five Justice in Housing bills finally passed. This demonstrated the ruling party's commitment to reform. Actual Selling Price Property Value Reporting is the basis for Actual Selling Price Property Taxation. If the former fails to pass, one can forget about the latter. The next step after Actual Selling Price Property Value Reporting is Actually Selling Price Property Taxation. It is certain to meet with even greater resistance. We hope whoever wins the election will show greater determination and courage in promoting Actual Selling Price Property Taxation. We hope he or she will establish a just system for property taxation, and a just system for housing provision.