Growing signs suggest China may launch nationwide property tax
China is likely to roll out its hotly-debated property tax to more cities before the end of this year, which analysts say will help close the wealth gap amid growing calls for “prosperity” common “from the central government.
The reform will allow local authorities to levy taxes on private property, empowering them to collect money from landlords that could be invested in improving public services and developing infrastructure. China currently does not have a nationwide property tax system for private properties, although an annual tax regime has existed in Shanghai and Chongqing for more than a decade.
Shi Zhengwen, deputy director of the China Law Society’s Tax and Fiscal Law Research Society, said such a national property tax was “very likely” and could be tested by the end of 2021 He told China News Weekly earlier this month. that there were “strong signals” from the central government that they were preparing to roll out the plan.
Such signals have been repeatedly shown by the highest echelons of government. More recently, in August, the finance ministry hinted at “moving positively and stably” on property tax reform, while a ministerial-level meeting convened to discuss the issue in May. .
Huang Zhonghua, a professor specializing in real estate studies at East China Normal University in Shanghai, said the central authority’s efforts to promote so-called common prosperity and a new land transfer policy this year would accelerate the wider deployment of property taxes. As part of the goal of common prosperity, the country plans to “adjust” the excessive incomes of the rich to fight inequality.
“The function of the tax is to reasonably adjust the wealth gap between people,” Huang told Sixth Tone. “The reality is that in many cases the wealth gap resulting from disparate ownership is larger than the income gap. It is therefore a good approach to work for common prosperity by imposing a property tax.
Experts like Huang believe that tax reforms would benefit local governments and provide them with stable income to invest in public infrastructure projects.
“It’s also a way to adjust the local real estate market,” he said, referring to how the tax might deter people from investing in more than one apartment, as it’s a growing trend.
Shanghai began collecting property taxes in 2011 from homeowners with a second property at an annual rate of 0.4% and 0.6% of the property price, depending on the size of their property. Meanwhile, Chongqing has imposed taxes of 0.5% to 1.2% on villa owners and those who own high-end luxury apartments.
Experts say these rates are similar to those in the US and UK, which levy annual property taxes between 1% and 3% of the total property value. Referring to the results of his own research, Huang said higher taxes have led many homeowners to move to smaller, cheaper apartments to help them balance their expenses.
“Some people think it’s a waste to pay such high property taxes and live in an apartment that is too big. Thus, the tax can effectively play a role in the reasonable adjustment of people’s living needs. Of course, in China (in the pilot cities), such effects are still to be seen. “
Huang believes that the country’s first-tier cities, which have seen their real estate prices soar, would likely be among the first places to pilot property taxes.
Publisher: Bibek Bhandari.
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