China urged to push ahead with controversial property tax as ‘inevitable’ solution to local debt crisis
- Proposed taxation on property owners, which will eventually cover ordinary Chinese households, has received strong opposition for the past decade
- A pilot programme in Chongqing and Shanghai mainly target villas and high-end property owners, but could be expanded to include the likes of Shenzhen and Hainan
China’s latest move to introduce a controversial property tax represents a fresh crackdown on property speculation and a curb on runaway home prices, but analysts believe it is also an “inevitable” solution to help solve the nation’s debt crisis and ensure financial stability.
A new scheme, like many Western countries, would eventually cover ordinary Chinese households. At the moment, taxes and fees are mainly collected only at land auctions, or in the property development or trading process, with few additional costs for residential homeowners.
However, the real estate tax has not been put on the legislation agenda for this year, with Beijing warned to exercise caution because it has the potential to impact a wide range of industries and households, as well as the country’s financial and social stability.
There’s no doubt that it will be levied. The only issue is how
“There’s no doubt that it will be levied,” said Cai Chang, a tax professor at Central University of Finance and Economics. “The only issue is how.”
Beijing’s proposed taxation on property owners has received strong opposition for the past decade due to the lack of availability of housing information systems as well as questions about the legitimacy of such a move, as the land which a house is built on is already owned by the state.
Previous discussions often involved a number of exemptions for ordinary households, particularly those living in the only flat they own, to facilitate early implementation.