Source: The Nation

Some of Thailand’s bigger landowners have begun serious studies of the government’s proposed Property Tax Act and are preparing to use or sell unused plots of land within the next three years before the new law becomes effective – should it be approved.

The sudden interest, revealed by a survey conducted by The Nation earlier this week, follows Finance Minister Korn Chatikavanij’s announcement of plans to seek Cabinet approval for proposed reforms of the property tax collection system before the end of this year, as a part of wider tax reforms.

Property developers and landowners have now become anxious to learn details of the draft law so they can manage their property holdings before 2012.

Pailin Chuchottaworn, CEO of integrated oil refiner and petrochemical manufacturer IRPC, earlier said his company planned to seek partners to operate or sell some its undeveloped properties, in order to reduce the possible property tax burden should the draft bill become law.

“We’re considering what we should do with these businesses. If there is a good opportunity for them to grow, we’ll keep them. If not, we’ll sell them,” he said.

KPN Lifestyle CEO Korn Narongdej, who, as the son of Kasem and Porntip Narongdej, is a member of one of Thailand’s larger landowning families, said his family had to study the proposed bill before it took effect.

“We don’t yet know about the details of this Act, but we’ll study it and maybe prepare our business before it comes into effect,” he said, adding that if the proposed law was implemented, the family would be willing to pay taxes accordingly.

Udon Plaza managing director Worapol Weerachatyanukul, whose company owns 200-300 rai of land in Udon Thani province, said his company was opening up its unused land for farmers to grow sugar cane. This move to manage the land was planned before the Finance Ministry announced its proposed changes to the law.

The family of beverage tycoon Charoen Sirivadhanabhakdi, which owns one of Thailand’s largest “land banks”, has also developed a business strategy to develop its land around the country, said a source close to the family.

The Sirivadhanabhakdi family has two property businesses: TCC Land and TCC Capital Land, the latter being a joint venture between TCC Land and Singaporean-based CapitaLand.

The source said the group had five master-plan projects worth nearly Bt100 billion to develop its land in various parts of the country. Before the proposed Act takes effect, the group will launch its plans to reduce the burden of the new property tax.

Following Cabinet and parliamentary approval, the government plans to introduce the new property tax next year, with a grace period of two years before it becomes effective in 2012. It will replace present household and local-government taxes levied on property, with a target of raising Bt60 billion to Bt70 billion a year.

Finance Minister Korn said the new tax measure, which should be ready for Cabinet approval later this year, would overhaul the property tax collection system.

At present, household taxes are based on revenue generated by a property, so unused land plots are not taxed, while local-government taxes are based on prices in 1971 and 1972, so the rates are very low.

The collection of local-government taxes currently accounts for only 10 per cent of the revenue of local administrative bodies. This compares with 70-80 per cent of local administrative revenue being collected in this fashion in developed countries.

The new property tax is expected to encourage the owners of large tracts of unused land to lease their properties for agricultural or other purposes, and this will help stimulate economic growth.

The Finance Ministry has set a maximum tax rate for property used for commercial purposes of 0.5 per cent of its appraised price.

The ceiling tax rates for property used for residential and agriculture purposes will be set at 0.1 per cent and 0.05 per cent of the appraised price, respectively.

Thailand’s proposed property tax

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