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Taxes, Fees on Land Use Increased
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In an attempt to curb runaway investment, China will drastically raise land fees and taxes, the authorities said yesterday.

In its latest directive, the Ministry of Land and Resources ordered that compensation be doubled for human displacement relating to new developments.

The land use fee for new construction projects shall also be doubled, the ministry announced. The current charges vary from 5 yuan (US$63 cents) to 70 yuan (US$8.78) per square meter.

The government also intends to triple taxes on the use of urban land, which currently stands at 1.2 yuan (US$15 cents) per square meter.

The ministry estimates that the new policy may push up the price of some industrial land by 40 to 60 percent. However, developers will be able to absorb the rise, given the policy's results in test cities.

The ministry said higher land prices and fees would check excessive land redevelopment for industrial projects and force local governments to improve project viability.

China posted an economic growth of 10.9 percent in the first half on the back of a 30-per-cent growth in fixed asset investment, both of which registered recent year-highs.

In a bid to prevent a possible economic crisis, the central bank has twice raised the benchmark interest rate this year and the government has clamped down on unauthorized investment projects.

The government believes that checking excessive credit and land supply growth could be an effective way of cooling the economy.

On Tuesday, the State Council, or the cabinet, announced macro-control policies aimed at tightening land supply.

Highlights include tougher punishments for local officials involved in illegal land transactions, more emphasis placed on safeguarding the interests of farmers losing their land, and setting a minimum price for industrial land.

The policy also strips local governments of their authority to spend the money from land sales, and orders that the revenue be incorporated into local budgets under supervision by higher authorities and local legislative bodies.

Under this policy, the government will raise taxes from investors for land use, which will be used for the protection and development of farmland.

There will also be a ban on leasing land from farmers for construction purposes, a back-door tactic increasingly used by local governments and investors to dodge taxes on land sales and approvals by higher authorities.

"The solution to major issues in the economy lies in deepening reforms of the economic system, but for now, approaching the problems in land use is the most direct and efficient way," said Sun Wensheng, minister of land and resources.

(China Daily September 8, 2006)

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