Close land tax loophole
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Close land tax loophole

An attempt by a major property developer to promote a "green" campaign has backfired, after the project was accused of being a means to avoid paying land taxes.

Recently, a post on the Facebook page of Impact Arena, Exhibition and Convention Centre -- one of the country's largest exhibition spaces -- went viral for all the wrong reasons.

Originally meant to promote a 50-rai banana plantation which it established near Impact Arena, the post instead attracted a barrage of criticism from netizens accusing the company of exploiting a tax regulation loophole.

The post said that the plot opposite Double Lake Condominium was initially "left deserted," but it has now been "transformed into a plantation with over 10,000 banana trees".

"As our CEO wants to make use of the 50-rai land plot near Muang Thong Thani Lakefront, the Project Management Department, Exhibition Project Department and City Management Department have been assigned to plant banana trees to supply the Impact Kitchen," the post said.

The agricultural project started at the end of last year, and the company is expecting to harvest the fruits soon, it added.

It didn't take netizens long to suspect that the developer established the banana plantation to ensure the land was taxed at a lower rate.

Under current regulations, land which is used for agricultural purposes is subject to land tax of 0.01-0.1%, depending on its value.

The tax rates for commercial plots and undeveloped land, meanwhile, generally range between 0.3-1.2%. According to the law, a plot can be considered agricultural land as long as it has at least 200 banana trees or 50 lime trees per rai growing on it.

As the economy reels from the fallout of the pandemic, the number of banana and lime plantations across the country has spiked -- undoubtedly because many landowners are trying to take advantage of the lower tax rates.

This trend is only expected to increase further after the Finance Ministry recently decided to end the 90% discount on land and building taxes, offered for two years to help ease the pandemic's impact on the economy.

The pop-up banana plantation near Impact Arena isn't an isolated case. A previously undeveloped 20-rai plot on Bangkok's Ratchadaphisek Road -- a prime area in the city's business district -- has been turned into a lime orchard.

With an appraised value of about 400,000 per square wah, or 160 million baht per rai, the owner would have had to pay 0.6% tax on the vacant property each year, or about 19.2 million baht per year.

However, with the limes growing on it, the plot was reclassified as agricultural land, which meant the owner is only obliged to pay 3.2 million baht in land tax per year.

Land and building taxes are meant to generate more revenue for local administrative organisations and help reduce income disparity. However, the current regulation has a glaring loophole which could only be exploited by the elites.

One can argue that ordinary residents could also resort to planting banana trees to benefit from the lower taxes, but the cost of maintaining the trees over time will quickly overtake the benefits of planting them.

If this loophole isn't fixed, land and building taxes will neither boost revenues nor solve income disparity.


Bangkok Post editorial column

These editorials represent Bangkok Post thoughts about current issues and situations.

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