20190302 (Sat)
What is RPGT? What is Stamp Duty? What is SST?
To answer this question, we shall look at taxation in a bigger picture – classification of taxes.
Tax can be classified into various types. It can be based on two main parameters:
From where and purpose
How to quantify (fixed or ad valorem)
If it is from the income of a person – it is Income Tax – a direct tax. If it is from another person collected on behalf of the government – indirect. For example, SST 6% of the legal fee is paid by client of a law firm, collected by the lawyer and to be paid to government. Standard rate is applied no matter how big or small the legal fee – thus a fixed or specific tax, and NOT ad valorem tax. On the other hand, if various rates are used with the amount, like Stamp Duty – 1% for the 1st 100,000, 2% for the next 400,000, 3% for … it is called “ad valorem” tax.
RPGT is a tax on real property – real estate and including shares of real property companies. The tax is levied on the gains – earning or profit and not on total amount transferred. So, it is called “Gains” tax. How is it quantified?
By a different rate for different period of holding – 30% is holding less than 3 years, 5% if holding for 5 years or more. Hence, the rates are different – thus ad valorem.
Is it a consumption tax? No, it isn’t. Consumption tax are like Goods and Service Tax (GST) or Sales and Service Tax (SST) or Value Added Tax (VAT). A good summary of how taxes are classified is available at link below.
http://tax71.blogspot.com/2009/06/classification-of-taxes.html