The new windfall tax will likely be capped at 5% of the increases in land valuations before and after a state project is built in an area, according to a tax official.
The Treasury Department is already responsible for keeping track and setting land valuations all over the country and the valuations are revised every four years. They will be used in the calculation of the increases in land value after state projects are built, the so-called “windfalls” for landowners.
Chumpol Suwannakijboriharn, a tax law specialist at the Finance Ministry’s Fiscal Policy Office, discussed the details of the bill on Monday at a hearing with property developers.
“If a plot is bought and then sold within four years, there will be no tax burden because there are no differences in the valuations,” he said.
Basically, the new tax will be charged on owners when they sell land after a state project nearby is completed or during its construction. For other types of properties such as shophouses, townhouses or condominiums, only the land portion of the valuations will be calculated.
In the bill being drafted by the ministry, the windfall tax will be capped at 5% but the effective rate will depend on prevailing government policies, Mr Chumpol said.
The bill categories state projects into two types — those being built before the law takes effect, such as the mass transit Pink Line, and future projects to be built after the law comes into force such as the medium- or high-speed train or double-track train projects.
In the under-construction project group, the tax base is calculated from the differences between valuations on the dates the land is transferred and on the effective date of the law.
For condominiums, the tax base will be the differences between sale prices and valuations on the effective date of the law. For new or under-construction units, the valuations will be 20% of the average valuation of condominiums in the same area.
Throughout the construction period of a state project, the tax will apply each time the land or condo units changed hands, calculated from valuation increases.
For land or condominiums near a state project completed before the law takes effect, the tax will apply only to commercial sales worth 50 million baht or more based in the valuation differences on the date the project is completed and on the effective date of the law.
After the state projects are completed, land sales nearby will be taxed only once.
Property developers who attended the hearing on Monday cast doubts about the imposition of the new tax.
Atip Bijanonda, president of the Housing Business Association, said investments in state projects were not the only factor driving up land prices.
“Developments by the private sector also add value to the land. How can the government draw the line which factor adds how much to the price increases? This bill assumes any price increase comes 100% from state projects,” he said.
Prasert Taedullayasatit, president of the Thai Condominium Association, said developers already had a large tax burden, from the 2% property transfer tax and 1% registration fee to the 3.3% special business tax.
“And now we have in the pipeline the property tax and windfall tax. The government should study the overall picture of the tax burden shouldered by property businesses before the windfall tax is passed.”