Taiwan (Republic of China)

Land taxation in Taiwan (Republic of China)

by Fred Foldvary
Dept. Of Economics, Santa Clara University



Land taxes in China go back to ancient times, when farmers paid one-eighth of their crop to the government. A detailed land survey was conducted in Taiwan in the last years of the Chinese empire, from 1898 to 1905. A series of Land Report Books were compiled, and plots of land were divided into sections called “tuan” (VanderMeer and VanderMeer, 1968).

Sun Yat-sen, founder of the Chinese republic, sought to transform the ancient Chinese land levy into modern form based on the thought of Henry George. Dr. Sun's ideology was called the “Three Principles of the People.” His land and taxation philosophy were also influenced by experience of the German colony of Kiaochow, which enacted a single tax on land value, since the governor of Kiaochow was also influenced by Henry George (Foldvary, 1998).

Taiwan was returned to China in 1946, and the Nationalist Chinese tax system was applied to Taiwan. After the defeat of the Nationalist party, Sun’s successor, Chiang Kaishek, set up the Republic of China on Taiwan in 1949.

The tax and land reform movements in Taiwan began in 1951. The government of Taiwan enacted the Statute for the Equalization of Urban Land Rights in 1954. The Statute was intended to achieve four objectives: (1) fair assessment of land value; (2) taxation according to declared value; (3) government optional purchase at declared value; and (4) public enjoyment of future land value increment (Lam, 2000).

Later, “Taiwan's President, Lee Teng-hui, held a doctorate in Agricultural Economics. Taiwan's story was documented in 1989 by the former Minister of Finance and Economics, Kwoh-ting Li, in The Economic Transformation of Taiwan. In this book, the role of land policies is described as one of many measures adopted as part of a commitment to economic development” (Dodson, 2006).

Tax policy

There is no unified tax code in Taiwan. Each tax is based upon separate legislation, with its own tax code. There are four categories of taxes into which a total of twenty-three revenue raising categories exist: National taxes (individual income tax, profit-seeking enterprise income tax, estate and gift tax, customs duties, and commodity tax), provincial and city taxes (the business tax, stamp tax and vehicle license tax), prefectural and municipal taxes (the land tax, agricultural land tax, land value increment tax, house tax, deed tax and amusement tax), and “monopoly revenues” (on commodities have been monopolized by the central government).

The following types of income are not included as taxable for the income tax: gains from land sales, gains from sale of securities, and appreciation upon reappraisal of assets (Lex Mundi Deskbook, 2003). However, there is a specific land-value increment tax, described below.

The central government’s taxing authority is the Ministry of Finance, which has administrative divisions, including the customs authorities and the National Tax Administration for income and business taxes. The municipal governments of Taipei and Kaohsiung and the prefecture governments each have local tax authority for the land tax, house tax, amusement tax and deed tax.

The agricultural land tax was assessed on farmland based on the amount of the harvested crops, so it was more a harvest tax than a land tax. It could be paid either in kind or with cash. The agricultural land tax was suspended in 1987 “to ease the tax burden on farmers” (Helplinelaw, 2005).

The house tax, enacted by the House Tax Act of 1967, is levied according to the value of the house, assessed by a local real estate assessment committee. The values must be publicly announced by the committee. For residential use, the tax rate should be higher than 1.38 percent and lower than 2.0 percent of the current value. The rate for owner-occupied houses should not exceed 1.38 percent. For commercial use, the rate is from 3.0 to 5.0 percent. For non-profit use such as hospital or civic organizations, the rate is 1.5 to 2.5 percent (Lam, 2000).

In 1977, the Land Tax Law was passed to provide stronger enforcement power for land-related taxes. Two major land-related taxes were prescribed: land-value tax and land-value increment tax. The land-value tax was developed to expand the local government revenue base. The land-value increment tax was designed to ensure the public benefit from future land value increments. Both the land-value tax land-value increment taxes are handled by local jurisdictions.

In 1981, a basic law governing the distribution of Taiwan’s government revenues was enacted, the Law on the Distribution of Financial Revenues and Expenditures (Lipsher). The government annually decides the proportion of tax revenues to be raised by each government authority

The land- and building-related taxes in Taiwan have included the land-value tax, agricultural land tax, land-value increment tax, deed tax, house tax, and estate and gift tax. The deed tax accounted for 8.5 percent of prefectural and municipal revenues in 1995 and was relatively less significant in the revenue system in Taiwan.

In 1995, national taxes accounted for 53.8 percent of total national revenues, while provincial and city taxes accounted for 20.4 percent; and prefectural and municipal taxes accounted for 20.9 percent. In that year, 75.3 percent of total prefectural and municipal tax revenues came from land taxes; the land-value tax accounted for 14.9 percent, and the land-value increment tax accounted for 60.4 percent. The peak of land-value increment tax collection was in 1992 when the land-value increment tax accounted for 71 percent of total local revenues (Lam, 2000)

The land-value tax is levied according to the Official Declared Value (ODV) of non-farm land. The ODV is assessed once every three years by municipalities. Market information is used in the assessment. The Ministry of Interior provides technical assistance to local assessment. A Land Value Assessment Commission is established by each local municipality with the responsibility of evaluating official assessed value. After the approval from the Commission, the assessed value is announced as ODV.

Taiwan’s land-value taxation is based on progressive tax rates of one percent, 1.5 percent, 2.5 percent, 3.5 percent, 4.5 percent, and 5.5 percent. A Starting Accumulative Value or SAV, is assigned as the starting base for taxation. For an ODV less than the SAV, the tax rate is one percent. For the portion exceeding the SAV, but less than 500 percent, the tax rate is 1.5 percent. For the portion exceeding the SAV, but less than 1,000 percent, the tax rate is 2.5 percent. For the portion exceeding the SAV, but less than 1,500 percent, the tax rate is 3.5 percent. For the portion exceeding the SAV, but less than 2,000 percent, the tax rate is 4.5 percent. Value at higher levels is taxed at 5.5 percent.

The land-value increment tax is levied on realized gains from land transactions, similar to a "capital gains" tax. Its rate ranges from 40 to 60 percent. The intent is to curb land speculation and limit the concentration of land ownership. The gains from land sales in Taiwan have special implications. In Dr. Sun's ideology, it is important that "the increment of land price should belong to the society rather than the landlord." He believed that the increase of land-value is attributable to social development rather than work from the landlord or investors. Dr. Sun agreed with Henry George that the profit from land should be returned to the society. The land-value increment tax became a powerful policy tool to regulate the equity of income distribution and to control land speculation. The seller must pay the land-value increment tax before the land transaction is completed.

When the increment is not in excess of 100 percent, the tax rate is 40 percent. If the increment is between 100 to 200 percent, the tax rate is 50 percent. If the increment reaches more than 200 percent, the tax rate becomes 60 percent.

Inherited land, publicly-owned land sold or donated, and private land given as a gift are exempt from the land value increment tax. To “promote economic development,” the government reduced the land value increment tax by 50% for three years tarting on February 1, 2002 (Helplinelaw, 2005).


Taiwan’s land taxes were a major cause of its economic success. In the 1950s and 1960s, Taiwan was transformed from an impoverished agricultural backwater to a thriving industrial state with one of the world's strongest economies. If the tax is applied to land value rather than the value of the harvest, then the land-value tax is not a burden on farmers, since it reduces the price of farmland, and does not add to the market rent of land.

A major strength of Taiwan's property tax system is its constitutionality. The implementation of the equalization of land rights is stipulated in the Constitution, rather than merely in laws that can be more easily changed or eliminated.

Another strength is the decentralized implementation of the land tax. Land taxation is a local government function, but with its objectives stipulated by the national Constitution.

The most important strength is that the stated purpose of the land taxes is not just public revenue, but also to obtain an equal benefit from the land. The main objective of the equalization of land rights is to redistribute profits from land through the measures of land-value assessment, declared land-value, land-value taxation, and land-value increment taxation. The land reform and land tax has achieved a highly equal distribution of wealth, without much welfare-state redistribution.

Another strength is that the land taxes of Taiwan have obtained a significant portion of the country’s government revenues.


The administrative structure to implement real property taxation program in Taiwan has evolved into a very complicated and inefficient bureaucracy. The bureaucracy through which central government controls local revenues and expenditures gives little incentive for local officials to seriously monitor the effectiveness of the property taxation system. Although property tax revenues continue to grow and are often seen as a healthy revenue source, the reality is that a significant portion of gains from land sales escape through regulatory loopholes. For example, land transactions within the annual assessment period are not subject to land-value increment tax even if sales value has increased significantly within the year. The objectives have been difficult to fulfill due to the complexity of regulatory, political, and social conflicts (Lam, 2000).

Another weakness is that the Taiwanese assessment practice was never able to reflect the real market values of land, and consequently never able to measure the real gains from transactions. The publicly declared land values are approximately 50 percent of market values. If the local overnment does not reassess land value, then the ODPV will not be changed. In this case, no land-value increment taxation is collected.

The weakness of the agricultural land tax was to base it on the harvest, rather than on the market rent or value of farmland.

The reduction of the land increment tax in 2002 shows a weakness in the understanding of the purpose and economics of taxing land, and also may be a symptom of the political influence of landowners.


The weaknesses of Taiwan’s land taxes can be overcome with governmental reforms. The system should be simplified to have one tax on all land values rather than also having a land-value increment tax, a house tax, and others. The tax rate should be increased to at least 80 percent of the land value.

Some of the revenue should be distributed as a people’s dividend, so that there is public pressure to have the full amounts assessed and collected. Voters should be able to recall officials who are not effective in collecting the full amounts.

The political landscape changed in 2000, when the ruling Kuomintang party was defeated in the national election, marking its first time out of power since Chiang and his forces moved to Taiwan from the Mainland. Greater democracy may provide an opportunity to refresh the ideals of Sun Yat-sen.


Landowners generally seek to have a lower tax on their land value and rent so that their properties will appreciate in land value. This includes government-owned land, as government agencies and politicians who control land are interested in using the gains from land for their own agencies rather than for the public good. The Taiwanese public is not sufficiently educated or motivated to seek to prevent land speculation. The interests of landowners and the ignorance of the public threaten to reduce land-value taxation in spite of its constitutional basis.


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