China to See Gradual Property Taxes

June 1, 2010 Taxation in China

The Impressive Face of the Government of ChinaThe Government of the People’s Republic of China has hinted at the gradual introduction of a new tax on properties, in an effort to quell the nation’s booming real-estate sector and downplay the effects of speculative investment.

On May 31st the State Council of China issued a statement confirming the approval of a fiscal reform proposal submitted to the Government by the National Development and Reform Commission. The State Council did not reveal the entirety of the intended property tax reforms, but stated that the implementation would be gradual with trial programs in selected regions. Previous statements by the Government indicated that Beijing, Shanghai, Chongqing and Shenzhen will be the initial testing regions, with reforms spreading across the country if deemed successful.

The Government of China has adamantly advocated the need for a fiscal measure to reduce speculative property investment across the country. According to official statements, if the rampant and unbalanced investment is not reduced, the country will experience an economically damaging property sector boom. The statements have lead economists to claim that the tax reform will target owners of more than one residential property.

According to Liu Ligang, economist at ANZ Bank, 20 percent of the country’s residential properties were held by investors with a portfolio of several houses. He further added that the tax would be levied at 0.8 percent of the market value of the property, and raise approximately RMB 120 billion (approx. USD 17.57 billion) annually. Additionally, Sabrina Wei, head of research at property consultancy DTZ North China, has attributed the tax to a tax collection raising measure for local Government bodies, to reduce reliance on the revenue from sales of local land.

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