New tax scheme for land speculators

The government is still arranging the rate of the progressive tax. However, the essential point is that the more profits you make, the higher tax you have to pay.

However, taxation observer Bawono Kristiaji estimates that the capital gain tax will have complicated administrative procedures. Furthermore, this policy is not easy to be monitored. Not surprisingly, recently the government is still applying final income tax over land or property. “The burden of capital gain tax is potentially to be passed on to the consumers. (Therefore) the government may fail to achieve the target to control the prices,” he said.

Thus, Bawono suggests the government to apply land value tax (LTV). Like the scheme of land and building tax (PBB), the LTV has a flat tariff. However, those two kinds of taxation systems would have different schemes of tax base. In this case, the LTV rate will be calculated merely based on the value of the land asset, no matter with the value of the building on the land, or the value of the land utilizations.

As illustration, there are two plots of land in an area: one plot of the land is left idle, while a commercial building is established on another plot of land. Those two plots of land are subject to the equal tax rate. Therefore, the owners of the unproductive lands will have a larger tax burden, as they will make no profit of the land. In this case, the owners of idle lands would have just made profits when the lands are being sold.

Bawono added, the tax scheme has been applied in 31 countries. He claimed, this scheme will be more efficient and effective in reducing land speculations. This taxation scheme is also more convenient in terms of administrative procedures.

But, the tax burdens will be equally severe, no matter the scheme.

(Muhammad Farid/Translator)