Tuesday, November 24, 2009

Implement two systems of property taxation

I APPLAUD the Government for using the property tax system to regulate tax collection from homes in accordance with economic conditions.

For example, the upward revision of annual values (AVs) of HDB flats was delayed from Jan 1 this year. According to a press statement on its website, the Inland Revenue Authority of Singapore (Iras) reviews annually the AVs of all properties, including HDB flats, to ensure they reflect prevailing market rental values for the purpose of determining property tax.

The current reaction to the HDB rent increases was delayed and now the Government will give a one-off rebate to cushion the impact of the taxman’s actions.

However, the announcement is silent on AVs of other properties. I suggest Iras segregate the imposition of property tax according to property type since it tackles a specific group at any one time, even after it has reviewed all properties.

Let me explain. Iras uses an assessment system to determine the property tax payable by homes which are mostly owner-occupied (that is, no rental evidence) and even grants a 4 per cent owner-occupier concession to residential homes.

However, such an assessment system is not efficient for properties that are rented out. Rented-out properties should be taxed on their actual income rather than reply on an assessment which can be prone to error of judgment.

I therefore urge the authorities to have two systems of property taxation – one based on assessment of the property if it is owner-occupied and another based on actual rent if it is leased out.

Patrick Sio

Source: Straits Times, 24 Nov 2009

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