The tax base for land transaction tax is determined by the official present value (OPV) before and after the transaction. The official present value may be either larger or smaller than the transaction price; furthermore, it does not fully take into consideration the seller's improvement costs and management expenses during the period in which they held the land. There is thus a considerable gap between this system and fair, equitable taxation. This is particularly true because no tax need be paid on transactions (and transfers of title) during tax holidays (i.e. the period between consecutive annual adjustments of the official present value), creating a serious flaw in the taxation system. The reason why such a serious failing has developed is because of the confusion in the land valuation system under Taiwan's land rights equalization tax system. For example, when land value tax is levied on the ownership of land, the tax base, official land value, is derived mainly from the official present value. On average, official land value (OLV) in Taiwan is only one quarter of official present value. On urban land subject to land value tax, the official land value varies between 8.9% and 37.6% of the price that the land would reach if sold by court auction or by the government; official present value varies between 22.71% and 76.63% of the price at which land is sold by the National Property Bureau. In other words, there is neither an open land market price nor a reasonable appraised market value. Owing to the fact that information is not made freely available, the prices paid in ordinary market transactions are kept secret. As one of the most important bases for market value appraisal - the regular market sale price is not available, the official present value and official land value become meaningless, and the economic and fiscal functions of land value tax (LVT) and land value increment tax (LVIT) are warped. Even more serious, the effective land value tax rate is too low, while the effective land value increment tax rate is too high. If one studies the two in combination, one can see that the combination of an excessively low average effective land value tax burden (around 0.1%) and an excessively high effective land value increment tax burden (around 10%) results in a serious lock-in effect, causing a loss of equilibrium in market supply and demand. In this article, simple mathematical models are used to show that the current tax system encourages land speculation and the pushing up of land prices. I believe that the reform of the land tax system is an urgent task if fairness and justice are to be achieved. The method of reform adopted should be to reduce the land transaction tax burden, while raising the tax burden on the ownership of land, in order to eliminate land speculation, revitalize the real estate market and promote economic development.