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Politics remains a wild card for land tax bill

The government’s land and property tax bill has passed final legal screening and is ready for parliamentary consideration, but politics will remains the key obstacle.

The Council of State has approved the cabinet’s version of the long-overdue bill. It levies taxes in a range from 0.05% to 2% of the appraisal prices of land and properties.

Farmland on which at least 75% is planted with crops would be taxed at between 0.05% and 0.1%, and commercial land at 0.5%. Vacant plots would be taxed at 0.5% and the rate would double every three years to a maximum of 2%, which is intended to promote utilisation of the land.

Residential and farm land of no more than 50 square wah and one million baht in appraised value would be exempt, based on Finance Ministry consideration. The taxes will be collected by committees set up by local administrative bodies.

“The country’s attempt to have a land and property tax has made progress. It is a clear version that is ready to submit to Parliament right away,” said Eathipol Srisawaluck, a law lecturer at Chulalongkorn University. “But it all depends next on whether the government is really determined and if parliament is sincere in deliberating it.”

His concerns reflect the delays in enacting reform bills for the past two decades.

The bill has a primary goal to advance the process of fiscal decentralisation as it helps local communities to collect and manage tax funds.

Asst Prof Eathipol said resistance was coming not only from landlords, but also from other property owners who do not recognise the benefit of the tax.

“The tax rate in the latest bill is not high, but not too low either. It would not have any significant impact on landowners,” he said.

The government expects the tax to reduce the concentration of holdings in the hands of large landlords, but Mr Eathipol says the tax rate is still too low to force such a change.

To create real change, he said, a progressive tax system based on the amount of land ownership, as proposed by the government-appointed National Reform Committee, should be implemented.

The land and property tax will be the country’s first asset-based tax, as all taxes are based on income. The country has no inheritance tax.

Sopon Pornchokchai, the president of the appraisal firm Agency for Real Estate Affairs, said the tax rate in the latest bill was lower than in high-income countries. He proposed the government not provide exemptions for any property if it wanted to create equality.

People should feel that the increase in the price of their property will be able to offset the tax payment, he said.

“The tax will strengthen local communities,” Mr Sopon said.

However, he remains sceptical that the current government will pass the bill because it would affect those who have large land banks.

Source: Bangkok Post

ThaiVest Editorial Team