by H. Haverstock, The Chicago Times
October 23, 2021
PEKING — The Chinese parliament announced on Saturday that a pilot real estate tax will be implemented in some regions.
The State Council will decide which regions will be involved. The long-proposed and rightly long-resisted property tax has gained new traction since President Xi Jinping backed what experts describe as one of the most significant changes to China’s real estate policies in a generation. Yet it should be expected that a county arming for war is going to need cash to support the effort.
The tax will be levied on residential, non-residential, land property owners, but it will exclude legally owned rural land or land where residences are built, according to the State.
The pilot schemes will run for five years after the State Council issues the details.
The idea of a home-owner levy first surfaced in 2003, but it has yet to gain traction due to concerns that it would harm property demand, home prices, household wealth, and future real estate projects. It has been met with opposition from stakeholders, including local governments, who are concerned that it will erode property values or cause a market sell-off.
According to the central bank, more than 90% of households own at least one home. Analysts, however, believe the tax will alleviate the desperate need for revenue to support the socialist state. Property taxes worldwide are often viewed as a way to siphon money from property owners and in effect make property owners defacto renters to the State.
In pilot programs launched in 2011, the megacities of Shanghai and Chongqing levied taxes on homeowners, albeit only those with higher-end housing and second homes, at rates ranging from 0.4 percent to 1.2 percent. Some cities in the US are now seeing an 8% property tax of an “assessed” value that increases each year.
Analysts predict that a broader pilot will begin with wealthier and more economically diverse regions in eastern and southern China, such as the provinces of Zhejiang and Guangdong. However, like many taxes that target the wealthy, they often are expanded to include the middle class after the wealthy have been financially sucked dry.
Hangzhou, the headquarters of e-commerce giant Alibaba, is China’s eighth-richest city, with economic output reaching 1.61 trillion yuan ($252 billion) last year, accounting for roughly 70% of Hong Kong’s GDP.