Beijing sets stage for imposition of commercial property tax this year
After three years of study, the Beijing Local Taxation Bureau has applied to impose a tax on commercial properties in the middle of this year.
Property analysts believe such a levy will have a negative impact on prices and transactions.
According to a mainland media report, Beijing Local Taxation Bureau director Wang Jiping said an application was submitted to the State Administration of Taxation to impose a property tax on office and industrial properties.
The central government suggested introducing a property tax in 2003 and chose six cities for a feasibility study.
The central government released measures last October to cool escalating prices. The market expected the government to impose a property tax on top of the existing capital gains tax to curb property price growth.
The government has not announced a tax rate, but the 21st Century Business Herald yesterday reported that the government would set the rate at between 0.8 per cent and 1.4 per cent.
Eric Chan, deputy managing director at Savills Property Services (Beijing), said the tax would have a negative impact on the market, although it would only apply to commercial properties. 'The tax rate is high. Transactions for commercial properties will drop if the government imposes the tax this year,' he said.
Transactions in the luxury residential market have dropped more than 30 per cent since the cooling measures in October, he added.
However, Yi Xianrong, an economist with the Chinese Academy of Social Sciences, said a tax rate of 1.4 per cent would be too low.
'It will not curb growth in property prices,' he said. 'The government should set the tax rate at 5 per cent or more.'
The market expects the government's next step will be to impose a tax on residential properties.
But Feng Changchun, head of the Centre of Real Estate Studies and Appraisals at Peking University, said it would take at least two years to levy a tax on residential properties because the mainland lacks a property valuation system.
In the offing
The central government suggested introducing a property tax in 2003
Media reports put the proposed property tax at up to: 1.4%