Govt accepts feedback and leaves current framework alone
The Government has decided to back away from changes it had proposed to tax laws dealing with gains made from property sales.
The public consultation process for the proposal attracted 64 responses with 60 opposing the change.
The Finance Ministry (MOF) said yesterday that 'on balance, it [is] best to retain the current framework of income tax treatment for individuals who sell their properties'.
It said that it had received 'salient public feedback' and saw merit in the points raised.
Dr Steven Choo, chief executive of the Real Estate Developers' Association of Singapore (Redas), welcomed yesterday's move, adding that he appreciated the Government's 'consultative approach and understanding of the industry's concern on the matter'.
Under the proposal, an individual who sells a property would not be taxed on the profit if he had not sold any other property in the preceding four years.
The measure sparked considerable unease and a two-day slump in property shares when news of it broke last month. Investors initially viewed it as a back-door attempt to impose a capital gains tax or a pre-emptive strike against property speculators.
The ministry's subsequent clarifications and reassurances about the proposals calmed much of those concerns but public feedback was mostly not in support of the move.
In a statement yesterday, MOF said there was feedback that the proposed change 'could bias purchase decisions towards investing in one bigger property, rather than numerous smaller properties'.
Respondents also noted that there were many other factors that should allow property sellers to escape tax on a gain other than considering the frequency of their sales.
These include owners who might have held a property for a long time before selling it together with another property within the same four-year period. The circumstances that led to the sale could also be significant.
'To cater to all such factors would not be straightforward, and would make the income tax treatment for property disposals complex,' said MOF.
It said concerns had also been raised about the 'inadvertent uncertainty for individuals who sell more than one property within any four years, even though there was no change to the current income tax treatment for such cases'.
Dr Choo of Redas pointed out that for most individuals, property is not so much a 'tradeable commodity but a long-term investment'.
Mr Tan Tiong Cheng, chairman of property consultancy Knight Frank, added: 'The current tax treatment on treating property sales gains has worked well and there is no need to tweak it further.'
KPMG's head of tax services, Mr Owi Kek Hean, noted that the Government had listened to public feedback in deciding not to go ahead with the proposed tax change.
'This is a clear demonstration of how the Government takes differing views on board in its formulation and changes it proposed to tax policy,' he said.
When, how or if to tax property gains is clearly a vexing issue.
MOF said that it had also considered alternatives to give property sellers certainty on when they would not be taxed on the gains but it noted that these alternatives 'bring drawbacks and complexities of their own'.
The scrapping of the proposed changes means the prevailing tax regime remains in place.
Singapore has no capital gains tax but the Inland Revenue Authority of Singapore assesses a small number of individuals - those who regularly transact in property - each year. It uses yardsticks like the circumstances that led to the sale to determine if the profits should be taxed at the appropriate income tax rate.
Source: Straits Times, 22 Aug 2009