Govt advised on lost tax income

The legal draft is an important step in solving the problem of inequality, he said yesterday. 

When the Democrat Party was in government, the draft law was forwarded to the House of Representatives, but the House was dissolved before the legislative process could be completed. 

Korn, who was finance minister in the Democrat-led administration, said that once the bill was enacted, the current regime of property tax and local maintenance tax would be cancelled, leaving the question of whether the new law’s tax-exemption provisions could result in the government losing an important revenue source.

However, in his view, given the prevailing economic situation, an increase in the tax burden for the middle class should be avoided.

Meanwhile, a Maybank Kim Eng Securities analyst said the long-awaited land and buildings tax, which was approved by the Cabinet on Tuesday, would in the short term have little impact on most homeowners as its focus was on the wealthy.

Tim Leelahaphan, economist at the securities house, said a lower personal-income-tax rate starting next year could offset any higher burden from the new land and buildings tax.

Longer term, developers will have more choice to develop land as the tax will improve land distribution, and will increase the use of land nationwide, which will also reduce economic inequality, he added.

The new property-tax regime will replace existing house, land and local development taxes.

The Treasury Department has completed land appraisals for 12.9 million plots out of a total of 32.1 million nationwide.

For the government, the new law will boost its asset-based tax income and is expected to generate more than Bt60 billion next year, mainly from commercial buildings. This is expected to offset the government’s losses from a new personal-income-tax structure, while the revenue generated will be for local administrations and to help improve utilities.

 Under the draft bill, land for agricultural purposes, residential property, commercial property, and undeveloped land will be subject to maximum tax rates of 0.2 per cent, 0.5 per cent, 2 per cent and 5 per cent of appraised value respectively.

The actual levy rates will be announced later.

The tax will be levied on land for agricultural purposes with an appraisal price of at least Bt50 million, with only the amount exceeding this amount being subject to the tax.

Only 1 per cent of farmers will have to pay the tax, as most of them own on average 30 rai (4.8 hectares) of land each, worth only Bt1 million.

For residential property, owners of first homes with an appraisal price below Bt50 million will be free from the tax liability. Using this criterion, about 99.96 per cent of homes nationwide will not have a tax liability.

The tax will apply to second homes on a progressive basis, with rates of 0.03 per cent to 0.30 per cent for homes with an appraisal value of less than Bt5 million through to Bt100 million and above.

Condominiums for rent are expected to fall into the commercial-use category. 

Tax will be imposed at 1 per cent for land left vacant or unused for one to three years, 2 per cent for four to six years, and 3 per cent for seven years or more.