A Study of the Income Tax on the Consolidated Income from House and Land Transactions
Date Issued
2016
Date
2016
Author(s)
Chen, Yung-Sheng
Abstract
Transactions of houses and lands have been subject to the income tax and land value increment tax since the implementation of tax on transactions of property, a situation which has led to the imposition of tax now on actual profits from transactions. The excessive capital flowing to the real estate market as a result of the unfair taxation caused the problems of soaring prices in the property market, violating the principle of fairness and justice, as well as distorting resource allocation. The two taxes have been through several deliberations in the planning of reforms aiming to subject specific or whole lands to land value increment tax periodically or according to actual prices of transactions, income from transaction of real estate subject to income tax, or the payment of land value increment tax deducted from income tax since their implementation. Owing to the wide range of law amendments involved, the difficulties of acquiring the actual selling price of properties, complexity of tax collection, the big impact on property markets and related industries, and public pressure, the reforms failed to be carried out. However, taxation on property transactions combining house and land is the norm in most countries in the world. In light of this, the necessity of reform of the separation tax system on transactions of house and land is undeniable. In order to solve the problems mentioned above, build a transparent tax system in a reasonable manner, curb speculation in the property market, and strengthen and improve the development of the real estate market, the MOF has actively deliberated on the tax levied income on house and land transaction according to the actual price of the transactions since 2014. Through widely consulting and collecting public opinions, the MOF drew up a tax reform scheme of combining income from transactions of house and land taxed by the income calculated based on the actual transaction price for the calculation of tax, and proposed amendments to related tax acts. After actively communicating with the public and making small adjustments, the MOF proposed amendments to the related tax acts, which were passed by the Legislative Yuan on June 5, 2015, and promulgated by the President on June 24 in the same year, coming into force on January 1, 2016. This epoch-making major tax reform makes great strides forward in capital gains taxation. The above policy, which the MOF committed itself to promoting, has been approved by the Legislative Yuan and thereafter enforced by tax authorities. However, between the early and late period of the policy implementation, there have been some expectations, views, and recommendations among government, academia, and other groups as follows: ㄧ、Reform goals (一)Establishing a reasonable and transparent tax system The government-layered horizontal information has to flow and be used through integrating the actual real-estate transaction price information on the tax of property transaction gains from the MOF and the registration from the Ministry of the Interior. Furthermore, the government-layered horizontal information helps to strengthen the entire housing policy, upgrade effectiveness of government policy, and make income from real-estate transactions reasonable and transparent. (二)Realizing the optimal allocation of social resources The government adopted this measure in order to create a reasonable tax on real-estate transaction income so as to realize the optimal allocation of social resources. In addition, it keeps the society and economy from unfavorable developments by avoiding excessive capital flowing to the housing market. 二、 Successful key (一)Collecting opinions from various sectors of society Pros and cons with different points of view appeared among various sectors of society during the planning stage of the new taxation different from the separate taxation of house and land. Therefore, the MOF collected opinions from various sectors of society through various channels to solve the problem of unfair taxation effectively by rolling review during the process of promoting the new taxation. (二)Enacting sunrise clause to reduce impact The purpose of the new taxation is to decrease disadvantages relative to land transaction gains which are not taxed on the amount of actual transaction prices exceeding the portion of the current land value so as to prevent tax evasion through price-rigging in the housing market. Houses or lands obtained and sold after January 1st, 2016 are regarded as new tax scope to avoid affecting the right of homeowners who bought houses in the past as well as reduce new taxation impact. As a result, the new taxation not only increases acceptance by society, but also upgrades tax compliance. (三)Reform direction in line with the Constitution In line with the Constitution, the tax reform continues to have the land value increment tax levied on profits from the sale of lands to avert violating Article 143 of the Constitution, which states that, the land value increment tax shall be levied by the government, if the value of a piece of land has increased not through the exertion of labor or the employment of capital. To solve the reform disputation over the Constitution and double taxation, the income tax levied on house and land transactions based on the actual transaction price and the land value increment tax deducted from the transaction revenue as the income tax base was regularized through the Income Tax Act to avoid double taxation. (四)Providing adequate supporting measures The government provides supporting measures for the new taxation that not only levied income tax on the actual selling price but also suspended the Specifically Selected Goods and Services Tax Act, and the tax increase revenues will be distributed to expenditures on social welfare measures of housing policy and long-term social care services to enhance the resultant benefits and achieve the multiple goals of narrowing the gap between rich and poor as well as realizing housing justice. 三、Study the purposes (一)To discuss the main problems and shortcomings of the existing income tax on real-estate transactions and analyze the impact on the Taiwan housing market while implementing Specifically Selected Goods and Services Tax on real estate to set for a more progressive tax reform (二)To discuss the history of income tax on real-estate transactions including its background and content of all previous tax reform by using the historiacal experience of all previous tax reforms of real-estate transactions (三)To deliberate and plan a suitable tax scheme by comparing our income tax law on real-estate transactions to those of major countries (四)To discuss the use of capital gain tax theories and trust protection principles in terms of the income tax reform (五)To evaluate the effect on real estate and tax revenue after the implementation of the new tax combining house and land based on the actual transaction price (六)To discuss seeking improved strategies as well as programs in response to the problems that will probably be faced after the implementation of the new tax combining house and land based on the actual transaction price To evaluate the increased tax revenue resulting from implementation of the new tax combining house and land based on the actual transaction price by using the number of registered actual real-estate transaction price cases from the Ministry of the Interior as well as the verified information of the individual and profit-seeking enterprise income taxes from the MOF.The increased tax revenue will be distributed to expenditures on supporting measures of housing policy and social welfare, to narrow the gap between rich and poor, to ensure tax fairness, as well as to realize housing justice.
Subjects
Tax System Reform of Real Estate
Actual Price Registration
The Specifically Selected Goods and Services Tax
Capital gains Taxation Theory
Legitimate Expectation
Type
thesis
File(s)![Thumbnail Image]()
Loading...
Name
ntu-105-P02323028-1.pdf
Size
23.54 KB
Format
Adobe PDF
Checksum
(MD5):e03aa5f9b6537d7d16ffe0ec82dfbdd0