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24-square meter tax plan wrong for Beijing

By Wang Yahuang: 0 Comment(s)Print E-mail China.org.cn, February 5, 2013

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According to media reports, the Beijing city government has submitted a property tax trial plan to the State Council for approval. If approved, the plan will be implemented by the first half of this year at the earliest.[File photo]

The proposed scheme stipulates that homeowners with a per capita living space equal to or less than 24 square meters will be exempt from the tax. In Shanghai the threshold for tax exemption is currently 60 square meters per capita. In comparison, Beijing's scheme is much stricter, and at that level would cover nearly all housing available in the city.

The policy as proposed would not work as expected to curb speculation in the real estate sector and might harm the interests of common people in Beijing.

Actually, using the 24 square meters as a threshold for tax exemption is unrealistic. In Beijing's current property market, the smallest properties available for purchase run about 40 square meters. According to the plan, the owner of such an apartment would pay the property tax on the extra 16 square meters, although he or she is hardly the kind of speculator the law targets.

Besides, the new regulation would likely push rents upward – landlords who own two apartments, one for living and one to rent out, will increase rents to offset the cost of the new property taxes.

Official statistics show that the population in Beijing was estimated at around 20 million, and most of them would be excluded from the tax exemption. As such, determining how to levy taxes on such a huge area remains a difficult problem.

According to Xinhua News Agency, more than 60 percent of those surveyed are opposed to the new tax.

Authorities say the purpose of levying property tax is to restrain property speculation – in that case, property taxes should be applied to owners of multiple properties, particularly those speculators. However, according to the current proposal, even low-income families who mostly live in housing subsidized by government would be required to pay property taxes.

From this point of view, we have reason to believe that the government's primary aim in levying such a tax is to raise revenue, rather than punish speculators.

Assessing the tax based on the 24 square meter standard makes no sense. Obviously, the value of 24 square-meters house in downtown Xicheng District is quite different from a house with the same area in suburban Daxing District.

Those who chose to buy a house in suburban areas with comparatively cheaper prices, in order to live more roomily, must pay taxes on their house, although they are not rich. To some extent, the pilot scheme in Beijing will force them to come back to the downtown districts, which would lead to worsening congestion and the soaring housing prices in the central city.

The author is a columnist with www.cb.com.cn.

This article was first published in Chinese and translated by Ma Yujia.

Opinion articles reflect the views of their authors, not necessarily those of China.org.cn.