Land windfall tax ceiling of 5%
Draft bill expected from FPO this year
The Fiscal Policy Office says it will set the ceiling for the land windfall tax at 5% of the inflated value of property from infrastructure projects.
The maximum 5% rate has been widely adopted in many countries, said FPO director-general Krisada Chinavicharana.
The Finance Ministry’s think tank is drafting a bill on land windfall tax for landlords who benefit from the increased value of land from infrastructure developments such as electric trains, high-speed trains and expressways, he said.
For instance, a property valued at 100 million baht before an infrastructure project is developed that increases to 150 million after the development is completed would see the landlord subject to tax on 50 million baht of value.
Mr Krisada said the draft bill would affect property within a radius of around two to three kilometres from electric train stations.
The land windfall tax, also called a betterment tax, would be imposed as a one-time payment when land ownership is transferred, he said. That means other landlords on a plot for which the tax has been paid would not be subject to it.
As long as property owners have not transferred ownership, they are not liable to the land windfall tax, Mr Krisada said.
The tax could increase asset-based taxes and diversify the government’s revenue structure, of which more than 90% now comes from income and consumption taxes. The government is hoping tax revenue can help narrow social inequality.
The Prayut Chan-o-cha administration has already passed inheritance and gift taxes, and the land and buildings tax is expected to come into force next year.
The Finance Ministry aims to complete drafting a land windfall tax bill this year.
He said the organic laws for the tax bill will clarify the details of which types of state infrastructure developments will make landowners in nearby areas subject to the tax.
Infrastructure projects launched before the law governing land windfall tax takes effect will be tax-exempt, said Mr Krisada.
The FPO is also seeking a solution as to whether landlords who lose benefits from infrastructure development, such as plots that become hidden by infrastructure projects, will be eligible for any compensation, he said.
Issara Boonyoung, managing director of property developer Kanda Group, said this tax would be good for the country as the government plans to spend tens of billions of baht to develop infrastructure projects and for land expropriation.
“The government should design suitable rates,” he said. “The tax should be calculated based on the appraised price of a plot, not based on a property block as is currently done, because this is not fair to some plots that have disadvantages like narrow entrances or no entrances.”
Mr Issara said the Treasury Department’s land appraisal prices, which are used to calculate land-related taxes, should be more up-to-date. Updating of land appraisal prices should be done more often than every four years, the current interval.
“Once a mass transit line is completed or starts operating, land appraisal prices for plots nearby should be updated,” he said. “Developers may not be affected by this tax as the higher cost will be transferred to consumers.”
Housing prices in projects near mass transit lines will be determined by supply and demand, not the impact of the new tax, Mr Issara said.
He proposed that along with a land windfall tax, there should be an impairment tax for land or property that sees its value depreciate because of infrastructure projects, such as those located on a plot where a flyover bridge passes.
Peerapong Jaroon-ek, chief executive of SET-listed developer Origin Property Plc, said the company disagrees with the windfall tax because it is redundant with the new land and buildings tax and other taxes the government is drafting.
“This tax burden will eventually be passed on to consumers,” he said.