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KUALA LUMPUR: The Center for Market Education (CME) has issued a four-point statement to oppose the government-proposed vacant property tax payable by developers on unsold units priced above RM500,000.
Dr. Carmelo Ferlito, who heads CME, said in a statement Wednesday that the tax, proposed by Housing and Local Government Minister Zuraida Kamaruddin, should be avoided.
He said there should be discussions on how to resolve the unsold units so that the parties involved can come up with proposals that can benefit the Malaysian housing market and economy.
In the first point, Ferlito said that the tax cannot even be defined as a tax, since a tax is always an amount of money that is paid after a certain benefit has been enjoyed.
“In the case of a vacant property tax, therefore, the very reason for a tax is missing: what benefits are developers enjoying by not selling their units? In fact, unsold units are already a lost profit for developers. A vacant property tax would sound like taxing a butcher for not being able to sell all of his meat stock, ”he said.
Second, he said the proposed tax could be seen as a violation of property rights.
“In fact, the built units belong to their rightful owner, who has to have the freedom to choose the property if the emerging market price is not satisfactory for him or her,” he said.
Third, such a tax would constitute a dangerous precedent, suggesting that the government can address how individuals dispose of their legitimate property if such use is not in line with the government’s ideas.
Finally, the proposed tax could discourage future initiatives. In fact, while the housing market is suffering, the cycle will eventually turn and the vacancy tax could discourage the emergence of solid business initiatives for fear of imposing taxes on eventual unsold units.
* Ferlito is a research advisor at Provalindo Nusa, Jakarta; Principal Investigator (Southeast Asia) at Property Rights Alliance, Washington and also Principal Investigator at the Institute for Democracy and Economic Affairs (IDEAS), Kuala Lumpur.
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