Will extending the HOC create more tax revenue than lost stamp duty?

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Extending the House Ownership Campaign Could Generate More Tax Revenue Than Foregone Stamp Duty

The extension of the House Ownership Campaign (HOC) could potentially generate more tax revenue than the RM500 million in stamp duty that would be foregone, according to estimates. The campaign, which was slated to conclude at the end of May, has been credited with stimulating sales within the property sector. Developers participating in the HOC are mandated to offer a minimum discount of 10 per cent on properties priced between RM300,000 and RM2.5 million. Buyers of these properties benefit from waivers on stamp duties for both the Memorandum of Transfer and Loan Agreements.
Projected Sales and Corporate Tax Generation

The current iteration of the HOC is projected to achieve RM36 billion in sales by the end of May. Based on a conservative profit margin of 10 per cent on this revenue, developers would realise a profit of RM3.6 billion. Applying the standard corporate tax rate of 24 per cent to this profit would yield approximately RM864 million in corporate taxes. This figure significantly exceeds the estimated RM500 million loss in stamp duty revenue, suggesting a net positive impact on government coffers. Furthermore, some developers may achieve profit margins higher than 10 per cent, potentially leading to even greater tax collection.
Economic Spillovers and Sectoral Support

Beyond direct tax revenue, the projected RM36 billion in sales under the HOC is expected to stimulate broader economic activity. The campaign caters to ongoing demand for property-related services and activities, thereby supporting various sectors. By facilitating sales, the HOC enables developers to meet financial obligations such as paying staff salaries and repaying loans. This, in turn, can lead to increased lending and a broader circulation of capital, generating further profits and income that contribute to tax revenues.
Addressing the Property Overhang

The HOC was initially launched in 2019 with the objective of revitalising the property market and addressing the overhang of unsold residential units and serviced apartments. By 2020, this overhang was valued at RM40 billion. The campaign's success in 2019, which generated RM23.2 billion in sales against a target of RM17 billion, demonstrated its efficacy in clearing inventory and boosting market confidence through buyer incentives like discounts and stamp duty waivers. The continuation of the HOC is seen by proponents as a necessary measure to sustain this recovery momentum.

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Will extending the HOC create more tax revenue than lost stamp duty?

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