ALTHOUGH Hong Kong developers are eagerly waiting for the details of a controversial property gains tax, China has postponed the release to the end of the year. ''Originally, the authorities were supposed to announce the details around the end of June. But from what we now understand, detailed rules are going to come out around the end of the year,'' said Stephen Lee, an Ernst and Young tax principal. Although the new law came into effect from the new year, the taxmen could not press for tax payments without the detailed rules. Besides, there could be amendments as a result of the lobby from Hong Kong developers and provincial governments. Whether, and exactly what, amendments are to be made is the point of contention between the central and provincial governments. Beijing wants to hit property speculators with the new law but provincial leaders say it fails to make a distinction between genuine developers and speculators and will hit foreign investment. Hong Kong developers, the largest property developers on the mainland, stand to lose the most if China goes ahead with the original proposals in the tax, announced last December. Indeed, billions of dollars worth of property deals have been put on hold as foreign and local players in China's property market are waiting anxiously for the details to be released. Under the new law, gains of 50 per cent on property, after deducting development costs, will be taxed at 30 per cent; gains from 50 per cent to 100 per cent at 40 per cent; gains from 100 per cent to 200 per cent at 50 per cent; and gains of more than 200 per cent at 60 per cent. Mr Lee said the latest news coming out of Beijing did not seem encouraging. Previously, there was talk that property deals sealed before January 1 would be exempted from the tax. ''But, now, it seems that the central government is not considering the exemption. If true, that would affect many Hong Kong developers,'' said Mr Lee. This would mean those who bought land or were developing properties before the new law came into effect would be slapped the tax if they sold properties at a huge profit from January 1. ''Virtually all property developers in Hong Kong have a piece of land in China,'' he said. Among those with sizeable land banks are New World group, Cheung Kong group, Sino Land, Henderson, China Overseas Land, Guangzhou Investment and Ryoden Development. But developers of low-end housing developments for sale on the mass market or those making attributable gains from property transfers of less than 20 per cent after deducting development costs will be spared. The new law will help the central government to wrestle back a key revenue measure from the local authorities, which have been accused of dishing out various tax incentives indiscriminately to big and small developers alike, losing the state millions of dollars in tax revenues.
