Taxing times: Local governments urged to ‘build’ a better law

Local governments must take a more active role in revising the land and building tax law, which has been in effect for five years, according to the Director-General of the Fiscal Policy Office, Pornchai Thiraveja.

Pornchai stated that the Land and Building Tax Act of 2019 grants local administrative organisations the authority to collect taxes to fund local development initiatives.

However, this property tax has faced several implementation challenges. For example, high-value urban land used to grow limes is taxed at a much lower rate than vacant land, creating discrepancies.

Local administrative organisations must scrutinise these issues to confirm the actual land use, said Pornchai.

“Revising the law requires input from both taxpayers and tax collectors to find common ground.”

He explained that the law aims for equitable and thorough tax collection, with rates varying based on land use. Determining land use in line with the law’s objectives requires careful judgment, necessitating a review of the legal provisions to ascertain where discretion is appropriate and whether the available information is adequate.

For instance, land designated as environmental, such as mangrove forests, requires a neutral party to confirm this status.

Clarity needed

Without such a declaration, owners might claim it as environmental land, while officials could classify it as land for profitable use, requiring additional information.

At the end of April, the House Standing Committee on Monetary Affairs, Finance, Financial Institutions, and Financial Markets convened to discuss the tax’s enforcement.

The panel identified issues with tax collection that contradict good taxation principles, which should be straightforward for both tax collectors and taxpayers and should entail minimal collection costs.

The tax collection process has been burdened by high operating costs and lengthy procedures, rendering it impractical.

Additionally, the determination of tax rates has been criticised as unfair because the rates based on different land uses are not beneficial to the economy, the committee said.

“The tax collection affects the real estate market and land purchases for commercial and industrial development. As a consequence, the law should be amended or repealed.”

Based on value

The law mandates tax collection based on the value of land and buildings, categorising land use into three types: agricultural, residential, commercial and industrial land, including vacant land.

The tax rate for land and buildings is progressive, based on their value.

The rates for agricultural land start at 0.01%, with an exemption for agricultural land owned by individuals valued at no more than 50 million baht.

Residential land starts at a 0.02% rate, with an exemption for primary homes and land valued at no more than 50 million baht.

Commercial and industrial land starts at a 0.3% rate, while fallow and vacant land that is not utilised appropriately is taxed at the same rate as commercial and industrial land.

If the owner does not utilise vacant land, the tax rate increases by 0.3% every three years, up to a maximum of 3%, reported Bangkok Post.