An aerial view of Lumpini Park and Rama IV Road. The new property tax is expected to be implemented from Jan 1, 2019.
The National Legislative Assembly (NLA) standing committee on the land and buildings tax will propose gradual collection of the additional tax bill to be incurred from the implementation of the tax over the course of four years as a relief measure for tax-affected business sectors.
According to the proposal, businesses that will be hit by the new land and buildings tax will be allowed to gradually meet the increase in tax burden each year with a 25% increase over four years, said Wisudhi Srisuphan, deputy finance minister.
For example, if a business is liable for an additional tax payment of 1 billion baht following the land and buildings tax's enactment, it will be subject to pay the 250-million-baht incremental tax for the first year, the 500-million-baht incremental in the second, the 750-million-baht incremental in the third and the 1-billion-baht incremental from the fourth year.
The relief measure will not be extended to residences because of a lack of comparative tax burden, as almost all homes are exempt from the current house and land tax and the local development tax, Mr Wisudhi said.
The new property tax, which will replace the outdated house and land tax and the local development tax, is expected to take effect from Jan 1, 2019.
In a related development, Mr Wisudhi said the standing committee also agreed to slash the exemption ceiling for first homes to 20 million baht from the 50 million previously proposed by the Finance Ministry.
However, implementation of the new waiver depends on the NLA members' votes, he said.
A draft bill on the land and buildings tax is being vetted by the NLA after being approved by the cabinet in March, with the waiver at the centre of the debate.
The Finance Ministry recently estimated that cutting the exemption ceiling for first homes to 20 million baht would nearly triple the number of residences subject to the land and buildings tax to 30,000.
As for the draft bill proposed by the Finance Ministry, it calls for the tax to be levied on first-home owners and farmland appraised at more than 50 million baht. A tax rate of 0.05% would be applied to first homes and agricultural land worth between 50 million and 100 million baht, and a 0.1% rate for homes above 100 million. People owning second homes would be taxed in a range of 0.02-0.1% of the appraisal price.
The tax on vacant land would rise by 0.5 percentage points every three years, up to a cap of 5%, while land for commercial and industrial use would be levied at 0.3-1.5%.
Based on the 50-million-baht tax exemption for first residences, the land and buildings tax is forecast to generate 64.2 billion baht for local administrative organisations, up from the 25.9 billion recently contributed by the house and land tax and local development tax.
Mr Wisudhi has repeatedly said that the government does not expect land and buildings taxes to substantially boost the government's tax revenue in the early stages of the implementation, but it will set the standard for the future and replace the outdated and unfair taxes.
Land and buildings taxes used for commercial and industrial proposes will contribute 80-90% of total land and buildings revenue, while the tax contribution from homes will be minimal because of the waiver for first houses and low tax rates for the second ones, he said.
The standing committee will conduct a hearing for stakeholders on the draft bill for the land and buildings tax on Dec 19.