Luxury Tax Bill Passed Legislation
Chun-yih Cheng

In order to curb speculation on housing market so as to enable affordable housing for the general public and to address wealth divide concerns, the government proposed in March 2011 a Special Goods and Services Tax Bill (Luxury Tax Bill) for the imposition of special tax at the rate of 10% or 15% on the sales or imports of certain goods or services. The Bill was introduced to the legislative body in March and within 1 month passed the legislation procedure to become law on 15 April. The record high efficiency of the procedure was prompted by overwhelming complaints from the general public that housing has been an unaffordable necessity and wealth divide has become obvious to an unacceptable extent.

The housing market has been highly speculative in the past few years, and the house price has skyrocketed. On the other hand, unemployment rate has been high, and pay rise has been frozen for years. As a result, housing is not affordable to the general public, and wealth divide has become a growing concern. The introduction of special tax has become a consensus within the society to bring down the high house price on the one hand, and to discourage the consumption of luxury goods and services on the other.

According to the Luxury Tax Law, 15% special tax will be imposed on the transfer of non-own use house if such transfer is effected within 1 year of its acquisition, and 10% if within 1 - 2 years. In addition, 10% special tax will be imposed on high value goods (including cars, yachts and airplanes) with unit price of TWD 3 million or above, or furniture with unit price of TWD 500,000 or above. Also, membership with admission fee of TWD 500,000 or above will be subject to 10% special tax.

Since the proposal of the Luxury Tax Bill, the housing market has dropped 10% to 30% in certain areas. But it is said that the real luxury transactions will not be affected at all because such consumers are all with deep pockets. Nonetheless, at least the social welfare budget will benefit from the imposition of luxury tax because such tax shall be exclusively used in social welfare expenditure as dictated in the Luxury Tax Law.