Beijing appears to be getting closer to consensus on how and when to unveil a nationwide property tax

Discussions on whether Beijing should implement a nationwide property tax were back in focus on Monday, casting a shadow on the outlook for the property sector.

The first draft of the property tax law will “definitely” be ready for national legislative review within this year, according to a report by Beijing-based The Economic Observer, citing sources in the tax system. This coincided with a comment by a National Bureau of Statistics official in July that indicated the department would “accelerate the property tax programme”.

The Chinese government has long toyed with the idea of taxing owners of residential flats, which represent the largest shares of household wealth. The tax is seen as helping tame house prices, while at the same time creating another source of government revenue. Under Chinese President Xi Jinping, the tax has been framed part of a “long-term mechanism” to stem speculation and stabilise prices.

“It is necessary for the state to release the details of the tax as a way to manage expectation. If the draft is modest, as most people expect, it could be a relief for the market,” said Danielle Wang, a property analyst with DBS Vickers.

“In the medium run the tax is necessary because as Beijing shifts its priority to prop up growth, there is worry that it could turn out to be another stimulus that boost property. Having a property tax in place could give policymakers a freer hand,” she said.

In China the debate has shifted from whether to impose the tax to when and how it should to levied, according to several analysts. But they diverge on the scope and intensity of the tax, with some arguing for exemptions based on floor area.