Windfall tax inches closer to action

Windfall tax inches closer to action

Maximum 5% rate follows global custom

A Yellow Line train model on display at a contract signing. Inflated property prices from big-ticket infrastructure will soon be subject to tax. KITJA APICHONROJAREK
A Yellow Line train model on display at a contract signing. Inflated property prices from big-ticket infrastructure will soon be subject to tax. KITJA APICHONROJAREK

A draft bill on the land windfall tax will go before the cabinet for approval in the next few weeks, moving a levy on inflated property prices from big-ticket infrastructure a bit closer to reality.

The government is set to collect land windfall tax at 5% of the increased value of property between the pre-contract signing of an infrastructure project and the date when the contract is signed.

The maximum 5% rate has been widely adopted in many countries.

It rests with the consumer whether to buy such property and potentially bear the real estate developers' tax, said Finance Minister Apisak Tantivorawong.

But he said he believes that the new property tax will not hurt home buyers because it is normal for property developers to buy land before an infrastructure project commences.

The land windfall tax is undergoing a public hearing, which will be conclude on June 28.

According to the Fiscal Policy Office's (FPO) paper on the public hearing, it has proposed that landlords whose land value is inflated will be charged the land windfall tax every time ownership is transferred from the time when an infrastructure project's contract is signed until the project's completion.

After transport projects begin operations, those owning land for residential and agricultural purposes will not be liable to pay the tax, while those who have land for commercial use and whose land value is higher than 50 million baht will be subject to the tax upon ownership transfer.

Only property developers with a project value of more than 50 million baht will be taxed in the event that land ownership is transferred after the infrastructure project is launched.

However, a one-shot tax will be applied to cases in which land ownership is transferred after a transport infrastructure projects start, the paper said.

That means other landlords on a plot for which the tax has been paid would be no longer subject to the tax.

Owners of land located close to infrastructure projects launched before the law governing land windfall tax takes effect will be exempt from the new tax.

Those who are liable for the tax must also own land within a radius of 2-3 kilometres from infrastructure projects such as electric train stations

If the draft bill on land windfall tax wins the cabinet's approval, it will be forwarded to the National Legislative Assembly to be deliberated upon before it is enforced.

In another development, Mr Apisak said that another draft bill, which will allow any person who receives permission from landowners to reap the benefits from a property pledged to mortgage lenders, will also seek cabinet approval.

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