Reactions to Launch of Property Tax

After winning approval from the State Council, yesterday, the Chongqing and Shanghai governments announced the launch of a property tax to tackle inflating housing prices that takes effect as of today.

The Shanghai property tax targets new purchases of second-homes by registered residents and new purchases by non-residents. The planned tax ratio is 0.6 percent of 70 percent of the market price of the houses targeted.

Chongqing is implementing a different version. Its property tax is targeted at both new home purchases and housing that has already been purchased. Specifically, the first batch of houses targeted includes stand-alone commercial houses owned by individuals, new purchases of high-end commercial houses by individuals and new second-home and above purchases by people who are not registered residents, do not own a company or are not locally employed.

The highest tax ratio of the Chongqing property tax is 1.2 percent.

Property tax is believed to be an effective weapon for local governments to follow the State Council's instructions to bring down inflating housing prices. According to He Li, chief editor of Caijing magazine, this new tax has not only met people's desire to tackle housing prices, but also protects the interests of existing home owners at a basic level.

However, Ren Zhiqiang, president of Huayuan Property Corporation, expressed a different opinion on his blog. He said, with China's current taxation system remaining unchanged, property tax is nothing but a type of robbery. It won't contain rising housing prices, and it will not change local government's fiscal reliance on land grant fees.

Ma Xueming, senior director of the research department of the China branch of CB Richard Ellis, expressed a similar concern. He said, though the property tax would make home-buyers hesitate initially resulting in a drop in the housing market trade volume, its influence would gradually fade within a year.

Though it's not clear how the tax will influence China's property market, the Chinese government plans for the tax to gradually spread and eventually cover the whole country, according to an EO report.

Xinhua News Agency quoted a source serving the Ministry of Finance as saying that the property tax revenue will be used to construct policy-based housing, especially affordable housing and public rental housing.

This article was edited by Rose Scobie

Links and Sources
Economic Observer Online: 国务院同意征收房产税 上海重庆今起紧急开征

Economic Observer Online: 重庆今日开征房产税 最高税率为1.2%

Caijing: 任志强的个人空间

He Li's Sina Blog: 何力的微博

Caixin: 世邦魏理仕：房产税的影响将在二季度显现

Ministry of Finance: 财政部国家税务总局住房和城乡建设部有关负责人就房产税改革试点答记者问

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