Property ‘windfall tax’ is long overdue

[webfact]

Property ‘windfall tax’ is long overdue

By The Nation

 

 

The government is poised to get some cash back from developers who build near public transport systems

 

The Cabinet will soon forward to the National Legislative Assembly (NLA) a “windfall tax” bill on sales of properties whose owners gain financially from government investment in public transport.

 

The proposed law targets both existing and new commercial developments such as condominiums that are located within five kilometres of public transport systems in which the government has invested. The aim is to redistribute the excess profits that private landowners and developers derive from multibillion-baht public-investment projects, such as elevated and underground railways.

 

The market value of privately owned properties often jumps after the state invests taxpayers’ money in new mass transit systems such as elevate trains and subways. The private sector subsequently benefits from building high-rise condominiums and other commercial projects on adjacent land, projects that command a much higher market value due to their close proximity to the new infrastructure.

 

Proponents of the bill believe it’s unfair to the general public when landowners and investors gain enormously from the so-called windfall profits after taxpayers’ money pays for the transport infrastructure. The ordinary citizen gets nothing in return.

 

The proposed law aims to levy a maximum 5-per-cent tax rate on the extra profits earned by landlords, condo developers and condo sellers, as well as other beneficiaries, when they sell their properties following completion of public transport projects. These people also benefit from public investment in elevated tollways, dual railways, seaports and the like and would be taxed accordingly under the bill.

 

The government estimates that landowners gain ten- to 20-fold in terms of the market value of their properties due to public transport infrastructure investment projects. It is thus warranted in levying a tax on windfall profits, which will generate more funds for future investment in public transport. In the past two decades, the government has spent hundreds of billions of baht in taxpayers’ money on transport projects, with more than 10 mass transit routes now under construction or recently completed, particularly in Bangkok and neighbouring provinces.

 

The proposed windfall tax is not to be confused with the land and building tax bill currently awaiting its second and final readings at the NLA later this month. Both pieces of legislation are seen as necessary fiscal measures in boosting government coffers, including those of local governments and, in doing so, reducing their dependence on the central government for development funds.

 

For the central government, land and property tax rates have been relatively low for a long time, so these bills represent a new growth area in terms of tax revenues. This is especially notable in view of the rapid economic growth rate and urbanisation of recent several decades in Bangkok and other major cities.

 

Regarding other revenue sources, such as income tax and consumption taxes like value-added tax, the outlook is not favourable either, since these appear to have reached their limit. Several countries have been unsuccessful in raising the VAT rate from the current 7 per cent due to its unpopularity, while the tax rates on personal income and corporate profits have been on a downtrend globally.

 

As a result, both the windfall tax and the new land and building tax are crucial to restoring a sense of fairness in Thai society.

 

Source: http://www.nationmultimedia.com/detail/opinion/30349980

 

-- © Copyright The Nation 2018-07-13

[theguyfromanotherforum]

This is just the beginning and typical of a government going bankrupt.

 

 

[Thian]

So the ones who bought all the land along the new train to Pattaya airport won't make full profit? I don't think so. They waited long for it.

[coulson]

5km from any bts or mrt station would be 90% of bangkok condos. Heaven forbid they may consider a motorcy stand part of a government installed public transport network.

[Destiny1990]

Is there anyone here that knows a single person that gained from a property sale?

after paying the agent fees and all sales taxes involved.

 

[theguyfromanotherforum]

Maybe a foreign tax also, like they introduced in Canada.

 

 

[Amplish]

I agree that windfall tax is a no-brainer, but the way they are going about may be wrong. They depend on valuations by by official estimates of what the value should be and limit it to 5 km from a infrastructure development. Instead it should be a fixed percentage for any real estate deal, regardless of the location and based on the differential between the original purchase price and the current resale value. The tricky part is that even now companies/individuals may undervalue  prices to dodge transfer fees. It won't be different this time, so even with reservations on the accuracy of value assessments, perhaps they can just use the median price according to past transactions (perhaps that is how the official valuations are done). In principle all profits should be taxed and making it universal makes for a much larger windfall for the government, so what is holding them back?

[farcanell]

And one wonders, as One does, when reading of things Thai

 

during infrastructure construction, property values can decline due to noise, mess, inconvenience, loss of proper access..... etc, over years of disruption

 

fairness would see a reimbursement to the seller, if he/she has to sell during infrastructure development.

 

lol.... now I’ve read that thought, I can stop wondering on it.

[NCC1701A]

the new high speed rail goes right through Hua Hin and Cha Am.

 

That means every condo (there are thousands, and thousands more planned) will be hit with this tax. 

 

 

 

 

[natway09]

I understand the idea & it is not a bad one , but how the hell are they going to set the goal posts?

Near impossible

[overherebc]

7 minutes ago, natway09 said:

I understand the idea & it is not a bad one , but how the hell are they going to set the goal posts?

Near impossible

QED.

[Srikcir]

7 hours ago, webfact said:

The proposed windfall tax is not to be confused with the land and building tax bill currently awaiting its second and final readings at the NLA later this month.

It is being confused.

The adjustment in value of properties due to proximity to new government infrastructure investments should be automatic if Thailand taxation authority is doing its job to keep real estate values current and correct. Valuation of property is a science and not an art.

More basically, increases in property taxes should be authorized by representatives of the tax paying public, not by an unelected NLA. The junta-appointed NLA has a conflict of interest with the Thailand taxation authority as well as the executive branch of government whereas an elected legislature would serve as a check & balance to government abuse of taxation authority.