TAIPEI: Chang Sheng-ho, deputy chief of finance, confirmed yesterday that the government is considering a heavy tax on luxury homes and said that his office will present a detailed plan after an initial assessment is completed in spring 2010.

The finance authorities have asked the Taipei City Government's revenue service to formulate a definition of luxury mansions within its jurisdiction by March or April 2010, he said.

Based on that initial definition of a luxury home, the finance authorities will devise a detailed process to appraise the market value of such residences and to levy higher taxes on them across the country," Chang added.

Citing the Taipei Revenue Service, Chang said houses valued at more than NT$100 million ($3.1 million) in Taipei City would be considered luxury residences. The existing tax on such properties is unfairly low, he added, noting that the tax on a NT$100 million residence is only about NT$38,000 a year. This is extremely low compared to public space management fees for such buildings, which is around NT$50,000 to NT$60,000 per month, he said.

The finance authorities have reportedly notified all tax offices in other cities and counties to take similar steps based on the Taipei City model, with the intention of raising taxes on luxury homes nationwide by 2011.

On the reports, stock prices of major construction companies, such as Kindom Construction, Kuo Yang Construction, Huang Hsiang Construction, Highwealth Construction and Farglory Land Development, fell on the local bourse by an average of about 2 percent during yesterday's trading.

Kindom, which is set to launch several construction projects in upscale districts in Taipei and Taichung cities, suffered the biggest stock price plunge of more than 3.5 percent shortly after the market opened, and did not recover during the day's trading.

Highwealth, which is planning to build a luxury tower near the intersection of Nanjing East Road and Hsinsheng East Road in downtown Taipei, with each unit valued at more than NT$100 million, saw its stock price fall by over 1.6 percent Tuesday.

Although the finance authorities' taxation plan is likely to affect the stock performance of some high-end construction companies in the short term, analysts forecast, the impact would be more psychological than substantial.

The luxury house tax would not significantly affect the wealthy, according to one analyst.

As long as bank interest rates remain low, the tax will not have any major impact on the local bourse, and the real estate market will continue to prosper, others contended.

China Daily/CNA

(HK Edition 12/16/2009 page2)