Real estate tax may land in more cities
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Shanghai Daily, December 8, 2011
China will look into further expanding its property tax initiative to more cities in the country after it has evaluated the trial operations in Shanghai and Chongqing, according to the Ministry of Finance.
The tax was implemented on trial in late January and a careful evaluation of its impact on home prices and the overall housing market in both municipalities will be conducted at the end of this year, Jia Kang, head of the ministry's research institute, told a recent exclusive interview with China Securities Journal.
The experience gained in these two cities will be very important to future central government decisions and the property tax should always be levied on a case-by-case basis as situations vary from one city to another, Jia said.
Jia refuted some observers who said the property tax trials in Shanghai and Chongqing seem to be ineffective in bringing down home prices or in contributing to local tax revenues. He emphasized the tax introduction should be recognized as offering a complementary policy to existing mechanisms rather than to slash home prices immediately or increase local tax revenues rapidly. He also said it would take a longer time for the tax to leave their impact on the market.
Jia said the transaction volume of high-end homes in Shanghai and Chongqing has both declined notably over the past few months and their prices have kept stable, which he said is one of the most obvious and positive impacts of the tax trials.
Since late January, Shanghai has imposed a residential property tax of either 0.6 percent or 0.4 percent, depending on the home price, on purchases by local families who already have one or more homes. The tax also applies to newly-bought homes by non-local families.
Chongqing also started to tax high-end homes at between 0.5 percent and 1.2 percent from around late January.
