Gradual Property Tax Reform Ahead
06/01/2010 Source: Global Times
The State Council said on its website Monday that it would gradually start to reform property tax policies, but experts said there is still a long way to go before collection of the tax begins.
The State Council said it has approved a proposal from the National and Development and Reform Commission to enhance the reform of China’s fiscal and tax systems. But it did not give a detailed explanation.
The announcement came after a report Monday in the China Securities Journal that Shanghai’s government had submitted a property tax plan to the central government, although there was no agreement on the standard of collection.
However, experts said the policy is more “a deterrent force” to rising housing prices.
“The government is using the policy to restrain the rising housing prices, instead of landing a blow against the market,” Li Xiaogang, director of the foreign investment research center of the Shanghai Academy of Social Sciences, told the Global Times Monday.
Li said designing a property tax would be complex, and the government would have to decide whether to levy taxes on a per-person or per-family basis, as well as how to deal with housing size and value when setting a tax rate.
He added that even if the government implements a property tax, measures to ensure the strong performance of mortgages would remain lacking.
According to figures provided by the Ministry of Land and Resources, new mortgage lending in 84 key cities last year was 774.9 billion yuan ($113.50 billion), up 59.7 percent from 2008. Bank loans for housing development reached 20 percent of total lending in 2009, according to figures from the China Banking Regulatory Commission.
“The later the property tax guides are launched, the less harsh the impact will be,” said Wang Xiao, a CCB International analyst.
