INCOME DERIVED FROM PROPERTY TRADING (Definition)

Dr Kanwaljit Soin asked the Minister for Finance what is the definition of income derived from property trading and how many people paid tax on this source of income from 1993 to 1995.

Dr Richard Hu Tsu Tau: Mr Speaker, Sir, with effect from 15th May 1996, gains from all property transactions within three years of its purchase will be deemed as income and taxed at the individual marginal tax rate or corporate tax rate of 26%. Prior to 15th May 1996, there were about 100 taxpayers taxed on income derived from property trading per year.

Dr Kanwaljit Soin: Sir, stamp duties have become payable with effect from 15th May for all vendors who enter into sale and purchase agreements within three years of acquiring their property and yet the Stamp Duties (Amendment) Bill has not been passed. Would the Minister consider this to be a regular practice in spite of the fact that the Amendment Bill has not been passed, but the stamp duties are already payable from 15th May?

Dr Richard Hu Tsu Tau: The Stamp Duties (Amendment) Bill will be introduced today and it will be passed at a subsequent sitting of Parliament after the Second and Third readings, probably next month. The Bill will allow stamp duties to take place with retrospective effect from 15th May, 1996.

Dr Kanwaljit Soin: Sir, in reply to my Question earlier, would the Minister be good enough to say whether this figure of 100 people, who have been charged income tax for property trading, implies that the Income Tax Department has not been diligent in its pursuance of this tax in view of the great amount of property speculation that has been going on?

Dr Richard Hu Tsu Tau: The figure of 100 is low, I agree, and the reason is that it is extremely difficult to tax a person on what he considers to be property gains, unless the person is an established property trader and does it regularly and frequently. It is precisely this problem that we are introducing amendments to the Income Tax Act to change the law so that anybody who sells within three years will be considered as having made property gains during this period. This is the reason for it.