The government’s decision to reduce the property transfer tax, especially on vehicle, is a masterstroke in not only recouping revenue loss, but also plugging the loopholes in our regulations.
Thousands of vehicles change hands every now and then. The five percent property tax is holding people from not changing the ownership. Many would choose to drive a car registered in another person’s name than pay the tax. There are millions of ngultrums on hold as people delay the transfer.
The few who do devalue the property. There is a standing rule. A person selling the vehicle must transfer the ownership within 15 days from the sale. There is a penalty of Nu 100 per day after the 15th day. The road safety authority also informed people of the importance of having the vehicle registered in the right owner’s name.
But not many do or wait until the vehicle’s value depreciates to pay the minimum tax.
Reducing the tax from five percent to one could encourage people to transfer the ownership of the property. That way, the government could recoup revenue lost, even if the amount is small.
When it comes to immovable property like land or building, the risk of disagreement and sellers changing mind force people to change the ownership even without authorities having to tell them. The National Assembly has made it clear who should bear the tax although it hardly matters, as the tax would be buried in the cost of the property traded.
With the tax reduction expected to encourage people to change ownership of properties, authorities could keep track of what is happening behind their rule. For instance, the vehicle import quota rule states that the vehicle quota cannot be sold are transferred under any circumstances.
Everybody, in this case even those who framed the rule, those implementing and those trading know what is happening. The rule has provision for penalties including paying the full taxes for violators. The government could recoup more revenue in taxes and penalties if the rules are strictly implemented.
The vehicle import quota is also debated with the government losing about Nu 3 billion in tax revenue and the quota blaming for the increase in vehicle number.
However, for every rule there are many tricks up the sleeves. Those buying or selling properties could still fine-tune their tricks and not pay the three or one percent property transfer tax.
How do we ensure people change ownership and pay the transfer tax is another problem that needs to be looked into.