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A Property Tax for Beijing?
 

March 6, 2012

The People’s Daily, a newspaper described as “an organ of the Central Committee of the Communist Party of China (CPC)”, is running with an article that property taxes are expected to be introduced in Beijing.

It would be the expansion of a pilot program that has been running in Shanghai and Chongqing since January, 2011. The tax rate is calculated in a different way for each city, although both are ostensibly progressive.

In Chongqing “all new villas and apartments priced from two times to three times above the average price of all newly-built homes in the southwestern city…are taxed at 0.5 percent of the transaction price; this rises to 1 percent for those priced three to four times the average and 1.2 percent for those priced more than four times the average,” according to a China Daily article.

Meanwhile in Shanghai newly-bought second and second-plus homes of permanent residents are taxed if the average floor area per family member of all homes, including the existing ones, is more than 60 sq m. Tax rates range from 0.4 to 0.6 percent.

It’s hard to judge the effectiveness of this program from official statistics. The NBS reports that prices in Chongqing have fallen by 0.3%, whereas in Shanghai prices have increased by 0.7%. These are close to the national average and comparable to Beijing. The biggest decrease was in Wenzhou (7.6%) and the biggest increase was in Urumqi (3.8%).

It’s also unknown which of the two systems would be used, or if something completely different would be applied to Beijing. Beijing has a large number of second homes, owned by people who want an apartment in the capital but don’t necessarily spend much time here. There is also a sense that in a market like Beijing, where new construction slowed by 18% in 2011, that the barn door has been shut too late. Whether this tax is made retro-active doesn’t seem to be in the reports.

The authorities are still working this out. Tellingly, in the People’s Daily article, “when a reporter asked: ‘will the real estate tax be expanded to Beijing this year?’ before [Finance Minister Xie Xuren] answered, an official next to him replied: ‘certainly.’ Xie laughed and said: ‘we’ll see*’.”

* the minister’s exact word were “research”, which I’ve contextually translated as “we’ll see”.

 

 

 

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GCiS (www.GCiS.com.cn) is a China-based market research and advisory firm focused on business to business markets. Since 1997, GCiS has been working with leading multinationals in sectors ranging from technology to industrial markets, medical, chemicals, resources, building and constructions and a few others.

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