Effect of property tax to be seen

(China Daily)
Updated: 2007-01-19 10:18

The State Administration of Taxation (SAT) issued a notice on Tuesday saying it would begin collecting land appreciation taxes starting next month and the tax rate would be between 30 and 60 percent. The change triggered hot discussion in the media, including the following excerpts:

Nanfang Metropolis News: The latest SAT move on the land appreciation tax may greatly help in containing the real estate boom, but it is unlikely to realize other government policy goals for the sector.

The developers will see huge increases in their costs after tax collection is changed according to the latest notice, especially for those who had hoarded large areas of land for development. The developers will probably pass along the increased taxes in the housing prices as long as their property can be sold.

Local governments will see huge income increases with this tax. The tax will be calculated in local government budgets, enabling the central government to better track the revenues.

The new tax guidelines will make it harder for local officials to manipulate land policy in favor of certain developers. The developers will find it harder to profit from their hoarded land.

The decision makers probably also wanted to check land speculation, encourage the development of low-end property projects and force the less competent developers out of the market through the latest tax move.

However, it is unrealistic to expect two birds to be brought down with the one stone. The property developers will try to reduce their taxes by raising their costs or by building more luxury housing for greater profits from the limited land on their hands.

There is much more for the government to do to get more affordable housing for common people. This includes granting tax benefits to low-end housing projects and imposing stricter supervision on the purchasers of low-price houses.


(For more biz stories, please visit Industry Updates)