Dysfunctional taxation and legal system invited property-price crisis, experts say
Surging real-estate prices are the result of market manipulation and money laundering, while dysfunctional taxation and legal systems have been unable to control a crisis that is widening income inequality, increasing homelessness, and driving working-cla
They say that the rush of foreign investment into the country was not accompanied by robust oversight, which allowed market manipulation to distort property prices, pushing them up to the equivalent of those in Barcelona, Spain – though Myanmar remains classified as a least developed nation.
A former director of the Department of Human Settlement and Housing Development said the lack of an effective taxation system invited market manipulation. Capital gains taxes on rising property prices as well as taxes on idle land are two tools for preventing markets from overheating, said the former director who asked not to be named. He specifically identified the lack of a tax on idle land as a weak point in the taxation system.
“Market manipulation must be controlled through taxation ... in Myanmar, no specific tax is collected on land owners,” he said, adding that this allows them to amass large tracts of land without having to pay any tax on them. “If someone is buying land and doing nothing with it, he or she must pay tax on this,” the former director said. He explained that in many developed countries a tax is charged on unused land, and that this prevents hoarding of land, which allows those with large holdings to reduce available supply so that demand drives up prices. In countries were land is bought but not used its owners are taxed, which encourages them to either rent or sell the land, thus adding to the supply available, which reins in prices.
He also pointed to the trend of prices rising when – and sometimes before – new development projects are announced. These sudden surges in prices should be taxed, he added, saying this was common practice internationally.
Legal loopholes and lack of oversight are also factors in the surge in real-estate prices, economists and lawyers said.
"They say no one is above the law. Ironically, there is no one under the law either," is how economist Dr Maung Maung Soe summed up the situation.
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