It may be best to gather more public feedback before changing the tax policy on profits earned from property sales, say analysts.
Analysts Channel NewsAsia spoke with said that it is because some are concerned the proposed amendment may hurt the property sector and Singapore banks.
The Singapore residential property market is showing signs of picking up, but analysts say the proposed tax amendment may hurt sentiment and derail the rebound.
That is because potential buyers may hold back on fears that if they sell more than one property during a four-year period, they may then be taxed on the profits.
The Finance Ministry has stressed that the proposed change is not an anti-speculation measure.
However, it is still something to think about for those with more than one property, or planning to own more than one.
Chong Lee Siang, partner at International & Corporate Tax Services at Ernst & Young, said: “It probably comes as a surprise to a lot of people. But the government has said that it’s not an anti-speculation measure so that may be a little assuring, but still (at the) back of people’s minds would be ‘when will I be taxed?’
“As you can see, the public is reacting and giving its feedback and expressing its concerns. So hopefully, the government will take a while to think through it more carefully and see what would work better or make people more comfortable.”
If the proposed change for the tax policy goes through, observers say local banks would get hit badly as housing loans make up a large chunk of their business.
Looking at the housing rental agreements, some say the government may want to consider introducing a two-year period of non-taxation if a person sells only one property, instead of the suggested four years.
As many HDB flats are financed through banks today, some believe the suggested tax amendment will hurt the banks’ portfolio.
Jeremy Goh, associate professor at the Lee Kong Chian School of Business in the Singapore Management University, said: “The banking business is basically taking deposit and making loans. If this proposal puts a damper in the market, then it will definitely have an impact on the bank.
“There will be less people needing loans, or people staying out of the housing market. So the demand for loans will be somewhat affected.”
The public consultation for the draft Income Tax (Amendment) Bill ends next Tuesday. So far, It has attracted about 50 responses.
Source: Channel News Asia, 10 July 2009