[EDITORIALS]Take time on tax reform issuesThe government is seemingly leaning toward abolishing the exemption of capital gains taxes on single-home owners. The Ministry of Finance and Economy said in its annual operation plan report on Thursday that it would consider levying capital gains taxes on people who own only one housing unit as a way of tax reform. It is likely to be done as a part of reform that reduces benefits on tax credit and reductions.
We agree that the tax system should be simpler and more transparent by streamlining tax credits or reduction related clauses. In that sense, we agree that the capital gains tax credit to single home owners should be abolished.
First of all, the tax credit given to single-home owners violates the principle of tax equity that mandates that tax should be levied on each source of income. It is not equal when one does not pay a single penny for tax even though enormous profits were earned by selling a house, while employees who do not own a house pay income tax automatically.
In addition, although the actual trading prices must be reported to local governments beginning next year, single-home owners who don’t pay the capital gains tax when selling the unit do not have the duty to report that. Thus, the government has no way to figure out whether the buyer reported the actual price or not. It would be difficult for the actual price reporting system to settle down properly under the current circumstances.
In the end, in order to seek equity in taxation and improve the system more reasonably, the capital gains tax credit on single-home owners should inevitably be abolished.
But it is not advisable to get rid of the system in one stroke that was introduced to help the middle class to make personal property.
Negative impacts and resistance are expected if the government suddenly gets rid of the tax credit system overnight. Also, if the government levies the capital gains tax to single-home owners while it is increasing property taxes on real estate holdings, the tax burden on single-home owners would soar.
Thus, the government should take enough time to go through a process of persuading people and making them understand the necessity. The government also needs to make supplementary measures of increasing tax credits for those who have owned the home for a long time or for those who sold a unit in order to buy new one.