Reinstating RPGT -- A Losing Game

Reintroducing Real Property Gains Tax
A Losing Game

In times of a fragile economy, the government should adopt a strategy on stimulating the activities of the real estate market, giving much needed incentives rather than imposing taxes.

Gavin Tee, a real estate investment consultant and speaker commented, “The market was just beginning to show signs of recovery and that is a positive note for market stabilization. However, we have yet to see the influx of foreign investments and gain the full confidence from property home buyers. Thus, it is not a good time to reintroduce Real Property Gains Tax.”

“The key issue should not be on the support to big developers, mega projects and multi corporations but on building the basics – the market condition. The basic economic theory to rescue the market should be applied, which is; to create a market and not to create a product. Thus, imposing RPGT is actually against the way.”

Gavin believes that the imposing of Real Property Gains Tax would affect a loss of income for the government in stamp duty collections. “The high deductions would greatly impact the number of Sales & Purchase transactions. It will further affect the business in the construction and professional services industry. In overall, there will be lesser stamp duty and taxes received by the government.”

“For example, a property with a value of RM 1mil will yield RM 24,000 as stamp duty payments. Assuming that it can be sold at RM1.2mil and make a RM200,000 profit, a sum of RM 10,000 will be collected as Real Property Gains Tax. With this introduction, the government may not only lose the RPGT revenue but potentially also the stamp duty fees due to the worsening of the market caused by RPGT.”

“Furthermore, Real Property Gains Tax would reduce Real Estate market price, further decreasing the stamp duty collection and ultimately affecting the government income.”

The introduction of RPGT would greatly affect 2 sectors, which is the high end real estate as well as the secondary property markets, particularly to older homes. “Whatever efforts in place now to strengthen the property market will go to waste,” he said.

“Real Property Gains Tax should only be applied when the property market overheats and absolutely not during a cool market period. This move will not only heavily impact the construction, renovation, raw materials and the professional services industry but also directly affecting the people’s and government’s income.”

In conclusion, Gavin hopes the government will reconsider its proposal for Real Property Gains Tax.