Buzz about ex­pected prop­erty tax grips hous­ing mar­ket; ex­perts al­lay fears

China Daily (Latin America Weekly) - - 13 Business - By WANG YING in Shang­hai wang_y­ing@chi­

For more than a decade, prop­erty tax has been re­garded by spec­u­la­tive in­vestors as a Pan­dora’s box — once levied, it could lead to many un­fore­seen sit­u­a­tions, push­ing home prices this way or that. Or so they be­lieved.

How­ever, in­dus­try in­sid­ers said prop­erty tax is merely a pol­icy to help pre­serve the sanc­tity and func­tion of home as a dwelling unit and pre­vent hous­ing from be­com­ing a tool for out-and-out spec­u­la­tive in­vest­ments.

In a by­lined ar­ti­cle pub­lished in Peo­ple’s Daily on Dec 20, Finance Min­is­ter Xiao Jie wrote about the need for a leg­isla­tive process to in­tro­duce grad­u­ally a real es­tate tax, and also es­tab­lish a thor­ough mod­ern real es­tate tax­a­tion sys­tem later.

Xiao’s ar­ti­cle sparked mar­ket spec­u­la­tion that real es­tate tax is nigh. Shang­hai-based The Pa­ re­ported that the is­sue of whether or not this year’s Na­tional Peo­ple’s Congress meet­ing would de­lib­er­ate the draft for prop­erty tax leg­is­la­tion is at­tract­ing a lot of mar­ket at­ten­tion.

For, the leg­is­la­tion can kick off only af­ter de­lib­er­a­tions by the NPC. The an­nual two ses­sions that started on Satur­day and will end later this month, may pro­vide more in­for­ma­tion, ac­cord­ing to media re­ports that quoted Jia Kang, for­mer head of the Finance Min­istry’s re­search de­part­ment, as say­ing.

The prop­erty tax will be col­lected at the re­gional tax, giv­ing lo­cal gov­ern­ments the right to de­ter­mine the tax rate and re­lated mea­sures, Liu Shi­jin, for­mer deputy head of the State Coun­cil’s De­vel­op­ment Re­search Cen­ter and also mem­ber of the 13th Na­tional Com­mit­tee of the Chi­nese Peo­ple’s Po­lit­i­cal Con­sul­ta­tive Con­fer­ence (CPPCC), was quoted as say­ing by the Se­cu­ri­ties Times.

Fis­cal and tax re­forms are ex­pected to emerge as buzz­words dur­ing this year’s two ses­sions, or the an­nual meet­ings of the NPC and the Na­tional Com­mit­tee of the CPPCC.

Tax re­forms will likely be ac­cel­er­ated this year at both na­tional and lo­cal lev­els. A uni­fied tax­a­tion law will help fa­cil­i­tate China’s eco­nomic growth, said Huang Jian­hui, head of the re­search de­part­ment of China Min­sheng Bank, in an in­ter­view to the China Se­cu­ri­ties Jour­nal.

Zhou Jing, head of project sales, JLL Shang­hai, a prop­erty con­sul­tancy, said, “Since the first batch of macro con­trol poli­cies on China’s prop­erty mar­ket was launched in 2006, the pos­si­bil­ity of a fresh prop­erty tax has arisen again and again ev­ery time home prices needed cool­ing down.”

In Jan­uary 2011, Shang­hai and Chongqing be­came the only two cities to levy prop­erty tax. How­ever, the prop­erty tax trial yielded mea­ger re­sults.

In Shang­hai, the tax is col­lected only from fam­i­lies whose hous­ing area is more than 60 square me­ters per per­son. It is taxed at a rate of 0.4 per­cent or 0.6 per­cent of the to­tal prop­erty price an­nu­ally, de­pend­ing on the apart­ment’s price per sq m.

In Chongqing, the trial tax is fo­cused more on tam­ing in­vest­ment spec­u­la­tion in high-end prop­er­ties, with the rate set be­tween 0.5 per­cent and 1.2 per­cent of the prop­erty price an­nu­ally.

Like other Chi­nese cities, the two cities’ real es­tate prices have con­tin­ued to rise in the past seven years.

“Ow­ing to the low rate for tax­a­tion, 100 mil­lion yuan ($15.8 mil­lion) to 200 mil­lion yuan tax col­lected can hardly cover the tax­a­tion regime’s op­er­a­tional ex­penses,” said Lu Wenxi, a re­searcher from prop­erty con­sul­tancy Cen­taline Shang­hai.

“The tax on prop­erty needs to be pru­dent as it is closely con­nected with peo­ple’s daily life,” said Yan Yue­jin, re­search di­rec­tor at the E-House China R&D In­sti­tute.

Yan said peo­ple who live in their prop­er­ties need not worry that the an­tic­i­pated tax will af­fect their lives. From a longterm per­spec­tive, real es­tate tax will help reg­u­late the hous­ing mar­ket bet­ter, pre­vent­ing spec­u­la­tive in­vest­ments, he said.


A prospec­tive home­buyer looks at the model of a res­i­den­tial project at a prop­erty sales of­fice in Taiyuan, Shanxi prov­ince.

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