Home tax would have the poorer folks weeping

Originally scheduled to go before Cabinet this month, the Finance Ministry’s land and property tax has been delayed for more study following heavy criticism. The intention is to boost tax revenue from landowners at least sixfold.

It sounds like a good idea for the country’s coffers, but taxpayers are upset, and rightly so. The very first clause in the legislation says houses and land worth more than Bt1 million would be subject to the new tax. That’s pointed directly at most people who own houses in Bangkok and other big cities. “Where would anyone find a house worth less than Bt1 million these days?” has been a frequent lament since the tax law was unveiled.

The sub-million-baht house that’s exempt from the proposed tax scheme is surely scarce in these times. It will be even rarer by the time the law takes effect, ostensibly two years from now. How could the law possibly be applicable in the future? The policy-makers should ask around – they’d soon discover how few people live in houses valued under Bt1 million.

Mounting a defence, the authorities note that land and property tax is in place in more than 40 countries and ought to be affordable for anyone who owns a house and also pays the annual car tax. 

A large segment of the public begs to differ. They already pay income tax as well as value-added tax, and the last thing they want to hear about is further extractions. Most people who’ve bought homes are still paying for them in instalments, a monthly burden tacked onto car expenses and other bills. 

They are the little birds struggling to build the right-size nest. And they are doing it without any help from the government.

If the government wants more income, it should restructure the tax system to get more out of the high-income bracket rather than squeezing money out of the “have-nots” and “have-little”. It could tax only those with second homes. And it could bite the bullet and implement the long-delayed inheritance tax. How about more effective taxes on savings accounts and stock trading, two areas left untouched? 

Instead, homeowners are feeling like easy targets.

Are they being “punished”? The government insists that the property tax would benefit the country by improving land use and making it difficult to speculate on property. No one would leave land undeveloped as long as it’s being taxed, it says. The logic no doubt does stand up in other countries, but in Thailand we can hardly guarantee the same results.

Our policymakers are being naive if they believe the property tax would prevent property speculation. Wealthier investors would happily pay the tax knowing that hefty profits were forthcoming later on. None of the major landlords in Bangkok would see the tax as an obstacle to holding on to undeveloped land.

Instead the authorities have chosen the usual target, an easier mark by far – the middle and lower-middle classes. These are the people who struggle to keep up with soaring living expenses, rising inflation and tax after tax. 

The land and property tax is not an overt evil in itself, but it would certainly open a can of worms. The existing tax structure is already viewed as unjust. Wealthier people handily derive far more benefit from income tax returns by deducting life insurance, equity funds, the Retirement Mutual Fund and domestic travel expenses. 

Tax, like death, cannot be avoided. But, to people working their socks off to own a house, if the government needs more money, it should instead be targeting the big birds with heavy pockets. It would be much fairer to fill state coffers with cash from the property tycoons who turn land into gold rather than stealing the nest eggs of the smaller income earners.