Could COV be taxed as income?

The process of reselling HDB flats was strongly regulated in the past. Property agents were not authorized to deal in these transactions, and COV was not yet in existence.

COV could have started from the time when rules on the resale market were relaxed, prompting some flat owners to ask for “under the table” money, above the official valuation.

Nowadays, COV is already part of a property transaction. The increase in COV is triggered by the process of valuation, which in Singapore is a table top exercise, with the valuer only taking into account the past trends and broad factors.

With this approach, variances in valuation between single flats, even if they are located in the same block, may emerge. Other problems may also crop up if there is a refined valuation process.

The COV can be possibly taxed as income if there is a status quo in the valuation process. After all, gains reaped by the seller when a property is sold at valuation are capital gains and are not taxable.

Thus, any surplus above the valuation cannot be capital gains and must be considered as income.

The seller still maintains part of the surplus, but the government currently shares in the surplus.

Channeling back the money to the town council where the transaction happened  would make the money an incentive for the respective town councils, which they can use to make the state more valuable.