Govt Urged To Review Property Gains Tax

Pavither July 3, 2019

Govt urged to review property gains tax

National House Buyers Association secretary-general Chang Kim Loong called on the government to review its imposition of real estate property gains tax (RPGT) for the sale of real estate. He noted that real estate is a long-term financial investment to hedge against inflation as well as provide the owner financial security during the later years of his life.

With this, he considered the current property tax as “a tax on inflation” that punishes genuine long-term investors, reported Free Malaysia Today.

While no tax was levied on the sale of a property after five years, a change in policy was made in the 2019 budget.

READ MORE: What you need to know about RPGT 2019? 

Now, exemptions are only extended for properties valued below RM200,000. For citizens and permanent residents, a one-off exemption is provided for the sale of one property within their lifetime.

Chang thinks that a sliding-scale tax rate would be better.

“If you dispose of your property within three years, you pay a 35 percent real property gains tax, in the fourth year, 25 percent, in the fifth year 20 percent and nothing after the fifth year.”

Economist Carmelo Ferlito, on the other hand, noted that similar policies were being enforced in other countries and seemed to have no effect on homeowners’ decisions to sell their property.

In fact, his own country of Italy has placed a tax on profits earned from the sale of a home regardless of how long it has been held.

Ferlito noted, however, that the tax could translate into an artificial increase in property prices, as a seller could raise the price to achieve a certain profit after factoring in how much property tax is payable.

“What is more likely, though, is that this could lead to sellers undervaluing the prices of their homes so they pay less tax and then reach an arrangement with buyers to accept under-the-table money for the true value of the home.”

When asked if the government should review the tax policy, he said it would depend on Putrajaya’s goal.

If the government wants to raise more money, then this is one way to do. But if it wants to raise home ownership, Ferlito sees no benefit in continuing with the RPGT.

 

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