STAMP DUTY ON PROPERTY TRANSACTIONS

Dr Wang Kai Yuen asked the Minister for Finance, having brought forward the payment due date of the stamp duty on property transactions as part of the package to deter real-estate speculation, (a) how many of these transactions have failed to complete after the stamp duty has been paid; (b) whether it is equitable for a purchaser to bear the stamp duty of an incomplete transaction resulting from circumstances beyond his reasonable control and (c) will the Government review the procedure to minimize this unnecessary burden on such a purchaser.

The Second Minister for Finance (Mr Lim Hng Kiang): Mr Speaker, Sir, there is no requirement for failed transactions to be reported to IRAS. IRAS therefore does not have information on the number of failed transactions.

The Stamp Duties Act was recently amended to allow refund in the following circumstances:

(i) the vendor is unable to prove his title to the property;

(ii) a purchaser, being a foreign person, is unable to obtain approval under the Residential Property Act (Chapter 274) to acquire or purchase the property;

(iii) the property is acquired or is proposed for acquisition by any public authority pursuant to the provisions of any written law authorising or empowering the public authority to acquire land compulsorily;

(iv) the purchase of the property is conditional upon permission by the competent authority to develop or subdivide the property and such permission is refused;

(v) either vendor or purchaser fails to obtain the approval of any public authority to sell or purchase, as the case may be, the property;

(vi) the Commissioner of Building Control makes an order under section 24 of the Building Control Act in respect of the property, ie, the building is unfit for occupation; or

(vii) a Strata Titles Board refuses an application for the sale of the property under section 84A, 84D or 84E of the Land Titles (Strata) Act (Chapter 158), ie, rejection of an application for en-bloc sale.

If the purchaser aborts the transaction, then the stamp duty is part of the cost for aborting the transaction. This is the intent of bringing forward the payment of the date of the stamp duty. If the seller aborts the transaction, then the purchaser should take legal action to enforce the contract. Nevertheless, stamp duty has been waived on a case by case basis where the purchaser has been able to offer satisfactory evidence that the transaction was aborted due to circumstances beyond his control and was not a speculative venture.

Dr Wang Kai Yuen (Bukit Timah): Sir, I would like to ask the Minister whether it would be more logical to revert to the original system of collecting stamp duty, in other words, at the completion of the transaction. Some of the letters and responses that I have received from IRAS to my constituents state that stamp duty is a processing fee. As such, regardless of whether a transaction is completed or not, it is collectable. If the fee is such a big amount and dependent on the value of the transaction, surely it is not processing fee.

Mr Lim Hng Kiang: Sir, if the Member can remember, we brought forward the payment of the stamp duty in 1996, as part of the anti-speculation measures. That was the whole idea - to bring forward the payment of the stamp duty so that only bona fide purchasers, who have real intent to buy property, will go into a transaction and they pay the cost. This is to deter speculation.

In the past, when stamp duty was paid at the end of the transaction, it did not cost very much for somebody to take out an option, speculate on a property, and if the market takes a downturn, abort the transaction. So this measure of bringing it forward is part and parcel of the anti-speculation package in 1996.

Dr Wang Kai Yuen: Sir, I would like to ask the Minister whether the Government had thought through the consequences of bringing forward the payment of the stamp duty. Because in the past, the fee was only paid upon completion of the transaction. Based on the reason that he outlined, for bona fide buyers who cannot complete the transaction for whatever reason, they are still obligated to pay the stamp duty, and that is surely not the intent of the anti-speculation measures.

Mr Lim Hng Kiang: Sir, I have already explained the reason for bringing forward the payment. Yes, of course, the Government thought through the whole issue before announcing the package in 1996.

If the transaction did not go through because of circumstances beyond the purchaser's control, as I have explained earlier of the seven circumstances, due to reason of the purchaser not being able to get the necessary approval to complete the transaction, then the stamp duty will be refunded. If the transaction fails to go through because the seller aborts the transaction, then the purchaser is entirely within his rights to enforce the contract. If the purchaser himself aborts the transaction, then it is part and parcel of the cost. He knows, before he enters into a transaction, that if he fails to go through with the transaction and he aborts the transaction, then this is part and parcel of the cost involved in aborting the transaction.

Dr Wang Kai Yuen: Sir, if I come across cases where the transaction cannot be completed because of circumstances beyond the control of the buyer, can I bring the cases to him for favourable review, and have the stamp duty refunded?

Mr Lim Hng Kiang: As I have mentioned, we do consider this on a case-by-case basis. But we need very good evidence that the transaction is aborted beyond the control of the purchaser. If the purchaser aborts the transaction, you cannot say that that is beyond his control, because he himself aborted the transaction. So he must pay the stamp duty.