Premier Wen Jiabao said yesterday that property tax reform should be studied "in the medium to long run", suggesting a plan to expand a tax trial might be delayed.
It's the first time Wen has given a slightly clearer timetable for expanding a property tax trial imposed in Shanghai and Chongqing on a limited basis.
Prior to this, government officials repeatedly pledged to study the option of expanding the scheme, sparking controversy partly because they lack the necessary legal foundation to impose it. In the near term, Wen said, Beijing would rather focus on expanding a trial on value-added taxes and reforming a resources tax.
Due to make way for Vice-Premier Li Keqiang in March after serving as the country's top economic policymaker for a decade, Wen made the comment during a visit to the Ministry of Finance, according to a mainland television report last night.
Reforming the system and "gradually setting up a property tax scheme to cover areas including home transactions and ownership in a bid to push forward continued healthy development of the real estate market" would be one of the two tax-related issues that "merit serious study" in the medium to long term, Wen was quoted as saying.
Improvements to the tax system to alter income distribution were also put on a longer-term agenda.
"The legality of levying property tax has long been debated," said Joan Wang, a director of research and consultancy at Savills Property Services (Beijing).
The law only grants individuals the right to use land for a maximum of 70 years.
Li has made it clear that he will push ahead with urbanisation over the next decade, which analysts say will require a series of institutional reforms, including overhauling the land system.
While saying the property tax reform was likely to be delayed, Wang was cautious on whether Wen's position was Beijing's final decision, given that he will retire soon. "We need to wait and see," she said.
Given the strong public debate about the issue for so long, she said Wen's comment was unlikely to have a big impact on property prices.