News Center



Home News Center News

Prof. Zhao Bo: Postponing Property Tax a Proper Move

Apr 09-2022   



An official with the Ministry of Finance recently revealed in a media interview that in 2022 conditions wouldn’t be in place for enlarging the property tax pilot scheme to more cities. The move rightly took in current circumstances to cautiously push forward the structural reform of the real estate market, wrote Prof. Zhao Bo of the NSD in a commentary.

 

Research showed that houses and apartments accounted for the largest proportion of Chinese residents’ assets, to the tune of 2.3 times that of national GDP. Levied at 0.6%, the realty tax could contribute revenues equaling to 1.4% of GDP to the fiscal coffer. In other scenarios that saw a range of exemption possibilities, the gain varied from 0.2% to 0.44% of GDP. Revenues of such magnitude were bound to exert enormous contraction and multiplier effects on the economy, said Prof. Zhao.

 

Consequently, the delay in expanding the trial reform could be evaluated from some perspectives, said Prof. Zhao. The first one was the move’s positive effect on stabilizing consumption at a time when pandemic lockdowns had seriously eroded both service and offline consumption. Moreover, postponing the property tax might help mitigate short-term instable factors in the real estate market and reduce its risks, which was much needed for an industry that had a bumpy ride since late last year but remained an important driving force for economic growth. Furthermore, putting off the trial scheme was in line with this year’s fiscal policy to reduce tax and fees to fend off downward pressures on the economy. China aimed to achieve tax reduction and exemption of 2.5 trillion yuan in 2022, and rolling out the property tax reform to more cities could run against such a goal, said Prof. Zhao.

 

What also stood in the way was some unresolved issues, pointed out Prof. Zhao. Regional heterogeneity in housing price and tax base abounded, making a nationally uniform property tax rate quite unviable and creating a need for city-specific policy. Another moot point concerned the destination of the property tax revenue: was it to be collected by the central or local governments and how should fairness be ensured among regions? Yet another issue was about the property tax’s enormous redistributive impact on social wealth, for which more research and exploration were warranted, said Prof. Zhao.

Prof. Zhao Bo: Postponing Property Tax a Proper Move

Apr 09-2022   



An official with the Ministry of Finance recently revealed in a media interview that in 2022 conditions wouldn’t be in place for enlarging the property tax pilot scheme to more cities. The move rightly took in current circumstances to cautiously push forward the structural reform of the real estate market, wrote Prof. Zhao Bo of the NSD in a commentary.

 

Research showed that houses and apartments accounted for the largest proportion of Chinese residents’ assets, to the tune of 2.3 times that of national GDP. Levied at 0.6%, the realty tax could contribute revenues equaling to 1.4% of GDP to the fiscal coffer. In other scenarios that saw a range of exemption possibilities, the gain varied from 0.2% to 0.44% of GDP. Revenues of such magnitude were bound to exert enormous contraction and multiplier effects on the economy, said Prof. Zhao.

 

Consequently, the delay in expanding the trial reform could be evaluated from some perspectives, said Prof. Zhao. The first one was the move’s positive effect on stabilizing consumption at a time when pandemic lockdowns had seriously eroded both service and offline consumption. Moreover, postponing the property tax might help mitigate short-term instable factors in the real estate market and reduce its risks, which was much needed for an industry that had a bumpy ride since late last year but remained an important driving force for economic growth. Furthermore, putting off the trial scheme was in line with this year’s fiscal policy to reduce tax and fees to fend off downward pressures on the economy. China aimed to achieve tax reduction and exemption of 2.5 trillion yuan in 2022, and rolling out the property tax reform to more cities could run against such a goal, said Prof. Zhao.

 

What also stood in the way was some unresolved issues, pointed out Prof. Zhao. Regional heterogeneity in housing price and tax base abounded, making a nationally uniform property tax rate quite unviable and creating a need for city-specific policy. Another moot point concerned the destination of the property tax revenue: was it to be collected by the central or local governments and how should fairness be ensured among regions? Yet another issue was about the property tax’s enormous redistributive impact on social wealth, for which more research and exploration were warranted, said Prof. Zhao.