Tuesday, January 18, 2011

Make tax system simpler for rented-out property

Jan 18, 2011

THE Government has introduced progressive tax rates on property tax for owner-occupied properties from this year. Properties that are rented out will continue to be taxed at 10 per cent of the annual value.

The Government should consider extending the progressive tax rate system for rented out properties and remove property income from the income tax returns. There is no need for the same income to be taxed twice - as property tax and income tax - especially as the taxes are based on the market-adjusted annual value of the property.

[Rental income to different people are tax differently. If you have an annual salary of $100,000 and have property bringing in $20,000 annually in rent, you will pay a higher income tax. If you have just one property bringing in just $20,000, but is otherwise unemployed, you pay zero income tax. So you don't pay the same tax for the same property.

For an ex-CEO, you don't seem to be able to see the whole picture.]

The progressive tax rate on rented properties can be made to mirror the revenue that is currently collected by the Government from the income tax levied on the rental income.

[How? It will have to take into account other income. So might as well figure it out by income tax returns.]

As an owner of property that has been rented out, I now find it a hassle to compute the net property income to submit in my income tax returns. I must identify the rental income and expenses that are expended on the property, such as property tax, insurance, repairs, maintenance charges, agency fee and other items.

[Hassle, then don't own property. Don't rent out. Singapore's tax code is already one of the most simplified.]

It is unclear if the owner is allowed to deduct the proportion of the rental that is set aside for furnishing of the property.

[Then find out. You only need to do it once.]

The complexity can be removed when the income tax portion is integrated into the proposed progressive rate on rented out properties. It will also save a lot of work for the Inland Revenue Authority of Singapore in policing the reporting of rental income.

Tan Kin Lian

[And now, how about NO tax?]

Jan 23, 2011
Adopt fairer tax system for owner-occupiers

The basis of assessment of property tax is the same regardless of whether a property is let, owner-occupied or vacant, while the annual value reflects its monthly gross rent. This is the stand of the Inland Revenue Authority of Singapore (Iras).

The rationale for it is fair when the property generates income and the owner can deduct the property tax paid as expenses against rental incomes in computing his income-tax return.

It remains fair if an owner-occupied property generating no income is exempted.

But it becomes a burden and is unfair when the owner of a wholly owner-occupied property has to pay tax for essentially 'no income'.

The actual tax I have paid over the past six assessment years, for instance, reflects this burden and shows the exponential rise of property tax.

Apart from a substantial rebate in 2009, the rising trend has been fast and furious. For instance, the tax increased by virtually 2.29 times from March 2007 to January last year.

[You neglect to mention that for owner-occupier, property tax is tiered, and progressive concessionary. Whereas for leased out premises, the property tax is a flat 10% with no concession. Secondly, the annual valuation is way under-valued (at least for HDB flats). So if you own & occupy a 3-rm flat, you may well pay no taxes, or minimal property tax.

If the annual value of your flat is $65k or less (monthly rental of about $5.5k which would put it in the landed property category), you'd pay 4%, and if you exceed $65k, the excess of $65k will be taxed at 6%.]

Economic transformation and changing landscapes improve standards of living but do not change the intrinsic values of property where the owners, through no fault of their own and for whatever reasons, choose to live in the same house for many decades.

The rental incomes of their neighbours have nothing to do with this group of owners, as they still live in their homes with no income generated.

The present system is unfair and not 'owner-occupied friendly'.

Iras should isolate unrelated factors like prevailing rental yield, market fluctuation and economic growth, and consider the factor of 'no income' to exempt owner-occupied property.

[If you have no income, you pay no income tax. If you have no property, you pay no property tax. If your property is expensive, then maintaining it is probably also expensive. If you can afford to maintain it, you should be able to afford to pay property tax. If you bought property 20 or more years ago, you are extremely fortunate. Young couple today can't afford the high prices of even HDB flats. The value of your property increasing is not your doing, but the entire neighbourhood and what the authorities did to raise the value of your neighbourhood. That is what the tax is a proxy for. If you are retired and living in a highly desirable location for working people who can benefit more from your strategic location, then it makes sense for you to give up the location so someone else can gain more from it. Perhaps he will commute less, pay less for fuel, spend less time on the road.]

Perhaps a more reasonable approach is to use 'date of purchase' to peg property valuation as the basic quantum.

Paul Chan

[It's not all about you. Or your situation. Or how life has passed you by. Or why you should need special treatment. Or about maintaining your way of life for your convenience. Or what you are used to. It's about redistributing resources for what's best for the nation.

Taxes are a way of redistributing wealth. If you bought your property a long time ago when it was relatively cheap, then you have really made a gain. Compared to your children who today have to fork out 10 times what you paid for a flat half the size of your property or even less, is it fair for the younger generation to pay higher property tax for a small property while you being from an earlier generation who had the opportunity to buy property when it was relatively cheap pay little or no property tax on a huge property?

Taxes are a crude instrument to do that, but it's the best we've got.]

No comments: