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Friday, October 18, 2013

Bring back pre-2007 RPGT rates


KUALA LUMPUR (Oct 18, 2013): The government should bring back the rates for the real property gains tax (RPGT) that were introduced prior to 2007 to effectively curb property speculation and control rising property prices, said PricewaterhouseCoopers Taxation Services Sdn Bhd (PwC) senior executive director Steve Chia.

He said the pre-2007 RPGT should be implemented with other measures such as tighter loan-to-value (LTV) ratio for third property onwards from 70% to 50%, abolishment of developer interest bearing scheme (DIBS) and increasing property floor price for foreigners from RM500,000 to RM1 million.

Chia believes that the pre-2007 RPGT would be more effective in curbing speculative activities compared with the current RPGT rates that "do not make much difference".

"There's nothing to stop people from passing on the RPGT by increasing prices but at the end of the day, it goes back to a holistic measure. If we can increase supply with affordable housing and suppress demand with LTV restrictions, DIBS removal, that will help us look at the full picture to manage property prices," he told a media briefing on PwC's Budget 2014 wish list here yesterday.

"Initially (after reverting to the pre-2007 RPGT rates) there will be an increase in (house) prices but if nobody buys, they will have to reduce prices... There will be a shock reaction in the first few months but after nine to 12 months, prices will adapt to the new RPGT rates," he added.

He said although investors with holding power may hold out longer to get higher selling prices, their ability to buy more properties will be limited thus reducing speculative buying.

As for increasing affordability of housing, PwC is proposing additional incentives on houses sold under Syarikat Perumahan Negara Bhd (SPNB) and the 1Malaysia People's Housing Scheme (PR1MA) such as an interest expense relief (for housing loan interests) for PR1MA homes and full stamp duty exemption for both programmes.

Current incentives for houses sold by SPNB are 50% remission of stamp duty on loan agreement and 50% remission of stamp duty on sale and purchase agreement (SPA). For houses sold under PR1MA, current incentives include stamp duty exemption on loan agreement and 50% remission of stamp duty on SPA.

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