Legally owned rural homes will be exempted from the pilot plan, which lasts for five years
In efforts to enhance housing affordability and tame runaway prices, China’s legislature will roll out a property tax pilot plan as part of a wider “common prosperity” programme in selected regions across the country, says South China Morning Post.
According to state news agency Xinhua, the State Council will select the first regions and the timing for implementing the tariff, including owners of residential and commercial property.
The programme exempts legally owned rural homes, lasting for five years until the National People’s Congress (NPC) turns it into a nationwide law.
Xinhua added that the Ministry of Finance and the State Taxation Administration will draft regulations and measures needed to support the programme.
Independent economist Ma Guangyuan said that a pilot plan that lasts five years “implies that it will be at least five years before the introduction of the [nationwide] legislation at the earliest. The suspense now is which specific cities will be picked for the pilot, and when it will start.”
As stated by Stansberry Churchouse Research, China transformed the country’s communal housing into private ownership, which created the world’s largest property market with USD1.7 trillion of new homes sold in 2017.
The Chinese government scrapped the idea of taxing property owners for years to curb runaway prices, redistribute wealth, and bolster state coffers with much-needed revenue.
In 2011, authorities of Shanghai and Chongqing were authorised to collect taxes on real estate within their jurisdiction, an effort to control rising prices.
Almost a decade later and under Xi Jinping’s order for citizens to share the opportunity to be wealthy, the property tax is again being promoted as a likely policy tool.
Plans to revive the tax began in May, as housing prices continued to surge amid administrative measures implemented across the nation to curb speculation. The effort was even more alerted when Xi defined the meaning of “common prosperity” in an August meeting: favourable changes in taxes and social security payments for middle-income earners, policies that increase earnings for low-income groups, and crackdowns on practices and loopholes that may give rise to “illicit income.”
Yan Yuejin, director at Shanghai-based E-house China R&D Institute, said, “The current practice in housing and land use will be strictly controlled and guided, especially such behaviour as real estate speculation.”
Yuejin added, “Taking into account the cities which had been discussed the most recent in the market, Zhejiang province is likely to be included in the tax reforms, especially Hangzhou.”
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