ST Forum : Puzzled by tax rationale on owner-occupied homes

Jul 15, 2010

Puzzled by tax rationale on owner-occupied homes

I AM gratified by the Inland Revenue Authority of Singapore's reply on Tuesday ('Property tax not based on market rental forecasts') that property tax is pegged to a property's annual value, which is determined by market rentals of similar properties at the time of assessment. My problem with predicating such a policy on market rental values is that owner-occupied properties derive no gain as long as owners reside in them.

So this category should be spared from tax rate fluctuations applicable to investors who derive rental incomes according to market value.

Second, reviewing property annual values yearly contradicts the previous practice of predicating the value on stable rental conditions over a period of time. The yearly review is akin to making a projection.

Again, any increase or decrease would have no effect on owner-occupied properties. So it is unfair to subject owner-occupiers to unrelated fluctuations. For instance, a property bought in the 1980s would be subjected to property tax that is four to five times higher over the next 30 years, although the same owner may be residing there all this while.

It is unrealistic and unfair to ask residents of owner-occupied homes to pay rapidly increasing property tax based on an intangible value. Owner-occupied properties deserve better consideration.

Paul Chan