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We've been hearing whispers about this for a while now - but it has been confirmed, China is set to expand its property tax pilot program to more cities this year.
The taxes were rolled out in Shanghai and Chongqing last year, in an effort to rein in property prices, bring down asset bubbles and create a steady revenue stream for local governments.
In many western countries, holding a property is taxed based on a fixed proportion of the property's market value. But here in China, industry insiders say, there is currently no tax on holding a property.
Chris Hu, vice president of B.A. & 5I5J Group, said, "China barely has any personal property tax now, most taxes are taken from income and transactions such as income tax when you receive your salary, and stamp duty when you are buying a house. But in assets holding, there is 0 tax on properties. "
Property tax has only been introduced into two cities in China. Now that the country is talking about enlarging the testing areas for this tax, experts say this will not only curb China's property market, but also help the struggling local treasuries.
Chris Hu said, "The supply of properties for sale and for rental in the secondary market will increase. This will bring down property prices and rental costs. "
However, other experts have the opposite view.
Prof. Liu Baocheng, University of Int'l Business & Economics, said, "It's definitely going up, because in terms of economics that's a definite additional cost into the entire value chain of the property market. So smart business people, either developers or home managers they will be able to create a mechanism to transfer this cost to end buyers or end home renters. "
On the positive side, Mr Hu says property tax can become an alternative income source, especially for big cities like Beijing and Shanghai.
Chris Hu said, "Beijing's land sale income last year was 102.4 million yuan, a rough estimation of property tax on approximately 6 million houses in stock will be over 100 million yuan in 3 to 5 years' time. This means property tax can be an alternative local financing to replace land sale, as there is limited land for sale. "
However Professor Liu warns there are many challenges in rolling out this tax reform. Double charging is one of them.
Chris Hu said, "A number of questions have been raised about the legitimacy of the double taxation, because people already paid for this tax when they bought the house, for the 70-year-property usage right." "Before we are very sure about the positive results, I would advise to stay cautious."
Experts also say transparency is essential in this tax reform, and it is inevitable that many grey areas and corruptions would be exposed as the tax reform continues.