Beijing acts to beat tax cheats

PUBLISHED : Wednesday, 19 July, 2006, 12:00am
UPDATED : Wednesday, 19 July, 2006, 12:00am

The Beijing city government has increased its efforts against tax evasion by thwarting sellers' efforts to understate sale prices on second-hand property.

From October, sellers must pay either a minimum tax or a 5.5 per cent business tax on the resale value of the property, whichever is higher. The move is also aimed at curbing property speculation.

Beijing officials acted to counter the widespread practice of sellers reporting sales at much less than market prices to reduce their tax charges.

Under the new rule, the government sets a minimum tax charge, calculated on the basis of average transaction prices of similar properties in the same area.

Property consultants said the city government also hoped the new rule - which would increase the cost of transactions - would curb speculation in the sector.

They believe transaction volumes in the secondary property market will decline after the rule comes into effect.

Tax on property transactions is one of the city's main sources of income.

In the first six months of the year, the city government received tax from the property sector amounting to 11 billion yuan, up by 2.86 billion yuan.

The takings accounted for about 30 per cent of the city's total tax income, according to Xinhua.

However, tax evasion in the property sector remains widespread. Last year, the city government named more than 80 companies that had evaded tax. Property-related companies accounted for about 50 per cent of tax evasion.