THE Chinese Government should lower the rate of the highly controversial property gains tax, or it would ''strangle'' property development in China, according to a valuation surveyor. Simon Tsui Yig-pui, a senior lecturer in the Department of Building and Real Estate at Hong Kong Polytechnic, said the property tax, which was introduced on a provisional basis in December last year, was too high and would mean foreign developers would earn a maximum profit of about 20 per cent. With the property gains tax, developers now pay three types of tax, including profit tax and business tax. The total tax rate will now range from 45.5 per cent to 78.2 per cent on profits, which is more than double the previous tax rate. Mr Tsui said the Chinese Government was imposing ''double taxation'' by introducing the property tax. Liu Hongyu, associate-professor and deputy-director of the Institute of Real Estate Studies at Tsinghua University, said the property tax should be lower than proposed, because the Government should guarantee a reasonable return for developers. He said the return in China must be higher than in Hong Kong, because China was still a developing country. He said the return should be about 15 per cent, which was at least three per cent higher than in Hong Kong. Mr Tsui said the higher return was to safeguard the greater risk faced by developers in China. Developers encountered difficulties in evaluating their returns in China because of loopholes in the development systems and the less-developed communication network through which they could obtain up-to-date information. Despite his views on the property gains tax, Mr Liu estimated annual growth of demand for commercial buildings in Beijing would be about 10.1 per cent in coming years. He said the rosy future for developing commercial buildings resulted from a projected shortfall in supply in Beijing in the lead-up to the year 2000. He also predicted a large increase in the supply of middle-to high-end office buildings, residential flats and shopping complexes in the next four to six years, which would strike a balance between supply and demand - preventing further bidding up of prices. Property prices in Beijing rose 20 to 30 per cent recently, which reflected the great demand in the market, Mr Liu said.
