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New tax law to hit land prices

Thursday, 24 July 2008

The Nation July 22, 2008 Experts say proposal comes at a time when market is facing many negatives Commercial buildings that are under construction in the Central Business District will have to pay the property tax when the Cabinet and the Parliament approve it. Property tax will have a negative impact on the property market especially because land prices are expected to drop following the tax hike, property experts said. Many property developers believe that if this law becomes effective, land prices, especially for undeveloped plots, will be adversely affected. However, they also believe that it will be difficult to get the law approved at this time. LPN Development managing director Opas Sripayak said if the Cabinet approves this law, undeveloped-land prices will drop. Meanwhile, property developers could face higher land-related costs, especially if they have a large landbank, he said. However, the law could reduce speculation in land prices. "Although the tax will come into effect in the next two years, many landlords and property developers will have to manage their land before that. Because of this, land prices should undergo an adjustment before the law becomes effective," he said. Property Perfect chief operating officer Dr Teerachon Manomaiphibul said, "I agree with the property tax. But it would be more appropriate during a property boom. Right now, the market is facing several negative factors," he said. Yesterday, The Nation reported that Finance Minister Surapong Suebwonglee has approved the final draft and will submit it to the Cabinet in the next few weeks. But it may take about two years before it becomes effective because it will also need to be approved by the Parliament. The new law will replace the existing one and will enable local governments, such as the Bangkok Administration, to collect more tax from owners of land and buildings. The law divides property into three categories subject to different tax rates. The first group is land and buildings used for commercial purposes, to be taxed at no more than 0.5 per cent of their value, with undeveloped land facing double that rate at 1 per cent. The second is residential property, which will be taxed at no more than 0.1 per cent. The third is property used for agriculture, which will be taxed at no more than 0.05 per cent. The new law will cover all owners of land and property. Owners of residential property are not taxed by the existing land-tax law, which imposes a flat rate of 12.5 per cent annually on land over 100 square wah. Under the new law, land speculators will be punished through the imposition of a higher tax, depending on how long the land has been left undeveloped. However, the tax will not exceed 2 per cent. Local government officials are authorised to impose the appropriate tax rate on landlords suspected of tax evasion, a source said.

 

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