“Chadchart Mode” leads Bangkok in a new era; it moves forward with a 15-minute garden policy across the city. The project scanned the Bangkok area for 1.22 hundred thousand plots of vacant which owned by millionaires through the big data, collecting a land tax of 1,500 baht per million, a maximum ceiling of 0.15%, causing the pressure on the Landlord to stop planting bananas in the vacant lot and turn to make substantial construction, such as building a park and football field. Along with studying the guidelines for the town, Chadchart also proposes to amend the law to control the use of vacant land for farming in the urban area.
It was reported that the work of Mr Chadchart Sitthiphan, the 17th Governor of Bangkok, who recently won the election by a landslide of 1.38 million votes, works in his style. The “Chadchart Mode” is expected to significantly change during the four-year tenure.
One of the highlights comes from the policy of “15-minute gardens throughout the city”, the goal of building a park near the house; it can be reached within 15 minutes. The method comes from Big Data to scan who owned vacant land, including small and large plots; more than 100,000 plots are scattered throughout Bangkok.
Policy guidelines are working on land distribution to make more public spaces. The project proposes collecting vacant land tax to pressure landlords who do not currently develop their lands. Or it is suggested that those lands be leased to the Bangkok Metropolitan Administration to establish more public uses.
Find a way to make the deserted land useful
On May 27, 2022, Mr Chadchart Sitthiphan visited the area to survey a private land plot of 2 rai at the Wong Sawang intersection, next to Wong Sawang Station Purple Line (Tao Poon – Bang Yai), which the landowner said in an interview will increase green space and rent a park to the Bang Sue District Office, actually it is used the land and building tax law mechanism to develop a green area which refrains from paying taxes.
Regarding this case, Mr Chadchart presented the idea of tax collection according to city planning zones which are seen as a valid policy but must look at the regime of the Bangkok government and see how much can be done. There must be a detailed consideration in each area as to the city plan; it must try to remain a fair tax system.
Under the Colour Scheme of the city’s developing strategy, the Red City Plan is distributed to be a commercial area, and the Orange City Plan defines it as a medium-density residential area, which is an area that is not suitable for farming. In this situation, urban planning may be considered a component of tax determination measures, etc.
“You must look at the law before whether we can apply the Colour Scheme to be determined together with the tax rate because the Land Tax Act of 2019 is not written clearly. By the writing that BMA has the privilege to adjust the tax rate so that the maximum rate will not reach the tax ceiling but did not discuss bringing other conditions to supervise. Therefore, they have not concluded that there will be a tax increase. We have to pay attention to which methods the BMA has the power to complete without amending the law; Rely on the existing regime to provide the most significant benefit to the citizens, as well as find a way to make deserted land useful, that beneficial to the public “
Find a channel to adjust the agricultural tax
Mr Chatchat continued that in the notification of payment of land tax There is an announcement of the Ministry of Finance together with the Ministry of Agriculture and Cooperatives regarding the definition of agricultural area, which the BMA has no privilege to amend this announcement, but the land tax law allows the locality to set their own taxes; just intend to avoid the collection of taxes that exceed the ceiling set in the law.
“If we find some areas should not be agricultural plots, such as bananas planted, may use the powers that the law has opened for them to adjust the agricultural tax rate higher than the recommended rate prescribed by the Ministry of Finance. I’m looking for how to get a good plan for vacant land in Bangkok. instead of farming took it to make a public park or soccer field for people in the community to participate and take advantage. It is a tax method that we are going to incentivize the private sector to have an incentive to turn the vacant land into public spaces.”
Open an important section – Land Tax Law
It was reported that the survey of the Land and Buildings Tax Act of 2019, can be summarized as follows:
“Section 37” imposes a tax ceiling which is divided into agricultural type not exceeding 0.15% or 1,500 baht per million, residential type not exceeding 0.3% or 3,000 baht per million, trade and commerce category not exceeding 1.2% or 12,000 per million. baht and vacant land type, not more than 3% or 30,000 baht per million
The crucial paragraph in Article 37 also states that “In the event that any local government organization wishes to collect tax at a rate higher than the tax rate prescribed by the Royal Decree (recommended tax rate during the first 2 years) to have the privilege to enact local ordinances prescribing the tax rate applicable within the area of that local government organization but must not exceed the specified rate (or not exceeding the tax ceiling)”
“Section 40” A civilian is exempt from tax on agricultural land. In the exception case of land with a value of more than 50 million baht, the tax must be paid at the specified rate.
Back then, “Section 8” defines 12 types of property that are exempt from land tax. In the event that the landowner does not want to pay tax, he or she can choose to use option (8) which states, that only the portion of private property that has been authorized by the government to be used for public benefit, in accordance with the rules and conditions specified by the government.” Minister of Finance announced.
Further, there is an announcement from the Ministry of Finance dated 21 June 2019. The essence specifies guidelines for making an MOU between landowners who agree to allow the state to use the land for public benefit. There must be a signature as evidence between the landowner and the local government organization, it also allows the locality to use the land throughout the tax year.
And the Fiscal Policy Office Ministry of Finance recommended tax rates for land tax guidelines to local government organizations across the country. The agricultural tax ceiling is not more than 0.15% or 1,500 baht per million, and the recommended rate of collection is 0.01-0.1% or 100-1,000 baht per million, so there is an additional adjustment to hit the tax ceiling by 0.05% or an additional 500 per million baht.
While the tax ceiling for vacant land is not more than 3% or 30,000 baht per million, the recommended rate is 0.3-0.7% or 3,000-7,000 baht per million. If the land is no longer used, collect an additional 0.3% every 3 years.
Tax revenues are drastically reduced during the COVID pandemic
Mr. Oran Asavapalangkul, Director of the Revenue Department of BMA told Prachachat Business, adding that the tax revenue structure of the BMA comes from the income collected by itself, with 30% of the income being collected by the land tax as the main income and the other 70% being the revenue collected by the government and remitted to the BMA.
In the past, in the situation of Covid 2020-2021, the government issued measures to reduce the tax burden by 90%, resulting in property holders only pay a tax of 10%. In fiscal year 2017, the income of local maintenance tax and building tax was 13,870.59 million baht, and fiscal year 2018 was 14,119.15. million baht, the fiscal year 2019 at 15,300.20 million baht.
After that, local income from property tax switched to the Land and Buildings Tax Law, reducing the tax burden by 90%, which means Bangkok has an income of 10%. In the fiscal year 2020, revenue collection is 1,255.63 million baht, the fiscal year 2021, revenue collection is 1,802.42 million baht, and in the latest fiscal year 2022, revenue for the first 8 months (1 October 2021-3 May 2022) has revenue collection of 651.50 million baht, partly because BMA extends the time for paying land tax from April to July 2022, so that a large amount of tax revenue will come in by the last quarter of the fiscal year 2022.
122,064 plots of vacant land
“We don’t have projections for land tax revenue in 2022 right now, so the estimated amount of tax collection will be based on the same tax collection, house tax and local maintenance. We still can store 14,000-15,000 million baht when the land tax is less, it shows that it does not really reflect the question of decentralization of taxation to the locality.”
Interesting information is land plot database divided by utilization in the Bangkok area in fiscal year 2022, it was found that 44,208 plots of land were used as agricultural land and 122,064 plots of vacant land; it means the government tax income equal to 0%.
The Director of the Revenue Department expressed the opinion that agrees with the policy of the new Bangkok governor because Bangkok is an economic area; using vacant land to grow vegetables which is a method to avoid tax, because the land tax law does not specify an area forbidding farming, therefore, farming is still legal according to the land tax law. But farming does not add value to the land for the purposes of the law. It is expected that in the future the land tax law will need to be amended to prevent this issue.
Regarding the idea of inviting the private sector to bring vacant land to the Bangkok Metropolitan Administration for rent, the Director of the Revenue Collection Division explained that in practice, if the private sector brings the vacant land to the district office for rent to make a park have rental income, it has to pay commercial taxes anyway, so if it wants to be exempt from land tax, the method is that the private sector must make a Memorandum of Understanding (MOU) allowing the BMA to use the land for public use without rental. And the Bangkok Metropolitan Administration has to explore the area as well that can be used to do what will be the most beneficial. In the process of improving the storage rate can be done by issuing the Bangkok ordinance and the Bangkok Council for approval.
Accelerate the survey to assess the tax
Mr Piya Pudklong, Director of the Finance Bureau of Bangkok, revealed that Property Tax is a new matter. The area of Bangkok is extensive, so land and buildings surveys for tax assessment have just been conducted for 50-60% of the total area. Currently, in the process of accelerating, it is expected that will take 2 years to be able to survey and assess the tax in full 100% of the area.
“The law provides for local duties procedures, which is Bangkok land appraisal and notifies the taxpayers, but the BMA is unable to assess all plots Therefore, it cannot collect 100%. It means the plots that have not been surveyed and assessed which will not be taxed retroactively.”
If success in collecting 100% of land tax, will bring an estimated revenue of about 12,000 million baht per year. In the future, when surveying and assessing the full amount of tax and collecting at the rate of 100% that must be paid, it is expected that the BMA has the opportunity to make a substantial income of 20,000 million baht.