Land-tax draft could cost politicians their vote bases

TAXATION

The proposed land and building tax is raising concern among the government's political advisers that passage could undermine popular support, particularly among low-income groups.

A Finance Ministry official said the new law could also be derailed by MPs wary about the personal impact on their own landholdings if the tax is implemented.

The annual tax is set at a maximum 0.5% of the value of land and buildings for commercial properties, 0.1% for residential properties and 0.05% for agricultural properties. Actual tax rates will vary by jurisdiction, and be set by local administrative bodies. Taxes are designed to increase sharply for undeveloped properties, while waivers will be offered for low-income groups.

The Finance Ministry argues that the new law will encourage landowners to develop their properties, encourage greater social equality and support a broader goal for communities to take greater responsibility in setting development policies.

The Democrat-led government has indicated that it wants to approve the draft law and bring it before Parliament by the end of the year. The draft calls for a two-year grace period before implementation, after which rates will be set at just 50% for the first year and 75% for the second year before rising to the full tax rate in the third year after the grace period expires.

A ‘‘Land for Sale’’ sign is seen on a vacant plot in Tak province. Undeveloped land will be subjected to high tax rates after the new law takes effect to encourage landowners to make better use of their plots.