Long-stalled land tax bill back in discussion

Undeveloped plots to attract a penalty rate

Source BangkokPost, published: 1/06/2012

The Finance Ministry is vowing to push forward the land tax bill, stalled for a decade, and may increase the tax ceiling, says the Fiscal Policy Office (FPO).

Director-general Somchai Sujjapongse said the FPO is now amending details of the draft. Once the amendment version is completed, it will arrange a public hearing. The major amendment is the tax ceiling rate.

Under the current draft there are three tax rates depending on the purpose of land usage. Land and buildings set aside for commercial use are subject to an annual assessment of not more than 0.5% of the value of the land, residential land and buildings will be taxed a maximum of 0.1% and farmland is taxed not more than 0.05% of annual valuation prices.

There are penalties for owners of undeveloped land.

"We are considering increasing the ceiling above 0.5% to benefit the country," said Dr Somchai.

Landlords with undeveloped land plots would be subject to tax rates that double every three years, up to a maximum charge of 2% of the land value per year, a fee aimed at encouraging greater efficiency in land use.

Dr Somchai added even though tax ceiling rates may be increased, these are maximum rates, and it is up to the local communities to determine the actual tax rate.

It plans to amend the land tax exemption for low-income earners, which shields most of the poor from significant tax burdens.

Under the existing draft, an owner of a condominium unit with a maximum space of 50 square meters is subject to a tax exemption.

Houses on plots less than 50 square wah in size and valued 1 million baht or less receive the same exemption.

Because land prices in large cities far exceed those in rural areas, it will amend the draft land tax bill to allow tax exemption for houses with total value of less than 1 million baht regardless of the size.


Land tax bill concern may result in tweaks

Law may be viewed as unfair to the poor

Source BangkokPost, published: 6/07/2012

The Finance Ministry is concerned the proposed land and building tax bill could be seen as a tool to help the rich and punish the poor, says the Fiscal Policy Office.

Director-general Somchai Sujjapongse said such a perception could derail the long overdue draft, under development for more than two decades.

The land and building tax bill was brought to parliament by the Abhisit Vejjajiva government but was not passed due to an early House dissolution.

Finance Minister Kittiratt Na-Ranong expressed his support for the bill early last month but asked the ministry to make some changes before it is sent for debate in parliament.

Although the bill, which imposes a higher tax rate for undeveloped land, is aimed at curbing land speculators, Dr Somchai said the rates under the new draft could be lower than those currently applied.

The current land and property tax bill imposes a tax rate of 12.5% of annual rent. The new bill proposes a rate of 0.05% based on the value of land and buildings on farmland, 0.1% for residential land and 0.5% for land used for commercial purposes.

"This means owners of big department stores or large-scale hotels could end up paying less in taxes under the new bill while the general public homeowners or farmers will pay a small tax after paying none before," said Dr Somchai.

Currently, land that is not rented isn't taxed, so farmers or landowners without much assets don't pay any tax, but likewise rich landowners also don't pay tax on any of their idle land. The new law would lessen the government's burden in subsidising local administrative bodies by 200 to 300 billion baht per year, said Mr Somchai. The draft empowers local administrations to set the effective rates and collect revenues for local development.

The FPO is reviewing four main aspects of the proposed law. First, it is looking to see if it's possible to implement the law first in provinces that have finished a plot-by-plot land valuation. Second, it will see if it's necessary to use the revenue collected under this bill to set up a land bank to buy land for poor farmers to rent as proposed by the government.

Third, tax exemption should be based on the value of land and buildings only and not on its size, as a 50-square-wa plot in Silom and another in a rural area are not valued similarly. Fourth, the ceiling tax rates should be higher than suggested in the original draft.

Related: land and house tax