Economy9 hours ago (Oct 23, 2021 07: 35AM ET)
(c), Reuters. FILE PHOTO: A man rides a scooter past apartment highrises that are under construction near the new stadium in Zhengzhou, Henan province, China, January 19, 2019. Picture taken January 19, 2019. REUTERS/Thomas Peter
SHANGHAI – A top Chinese decision-making body said that it would introduce a pilot real-estate tax in certain regions on Saturday, according to the official Xinhua news agency.
The State Council (or Cabinet) will decide which regions will be affected and other details, Xinhua said.
The long-anticipated and stubborn property tax gained momentum after President Xi Jinping supported what experts call one of the most fundamental changes in China’s real-estate policies in a generation.
A tax could help red-hot home prices that have soared more than more than 2,000% since the privatisation of the housing market in the 1990s and created an affordability crisis in recent years.
Talk of the plan comes at a delicate time as the market for property is experiencing significant stress and home prices are falling in many cities.
The tax will be applied to residential and nonresidential properties as well as land owners and property owners. However, it does not apply legally owned rural land, or to residences built on it, Xinhua stated.
The pilot programs will be in effect for five years after the State Council issues the details.
The idea of a levy on home owners first surfaced in 2003 but has failed to take off due to concerns that it would damage property demand, home prices, household wealth and future real estate projects.
It has been met with resistance by stakeholders, including local governments. They fear that it will cause market declines or erode property values.
Over 90% of households own at least one home, the central bank said last year.
But analysts believe the tax will bring in much-needed revenue. Capital Economics stated in a Friday note that
” Land sales are no longer a sustainable source for government revenue. “Gradual implementation should also reduce fears that a tax might cause prices to crash. “
In pilot programmes rolled out in 2011, the megacities of Shanghai and Chongqing taxed homeowners, albeit just those possessing higher-end housing and second homes, at rates from 0.4% to 1.2%.
However, the pilot programs have not been expanded to other cities.
Analysts believe a larger pilot will first be expanded to include richer and more economically diverse regions of eastern and southern China, such as Zhejiang or Guangdong.
It is possible that Zhejiang will be included in the reform. This is especially true for Hangzhou,” Yan Yuejin said, director of Shanghai’s E-house China Research and Development Institution.
Hangzhou, the base of e-commerce giant Alibaba (NYSE:), is China’s eighth-richest city, with economic output reaching 1. 61 trillion yuan ($252 billion) last year, about 70% of Hong Kong’s gross domestic product.
1 = 6. 3839 renminbi)
Mainland China’s Reliance on Land Sales (by province) https://tmsnrt.rs/3lyvluJ
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