Time for China to tax property

By Dang Guoying (China Daily)
Updated: 2007-03-14 10:50

For example, property tax can be collected to cool down individual housing speculation. But if enterprises are not taxed, individuals could transfer their personal properties to companies to evade taxation.

It is said that families would be taxed according to the floor area of their homes. This has aroused much criticism. The floor area of many rural homes is much bigger than those of urban residents and a 100-square-meter home outside the Fifth Ring Road in Beijing costs less than a 30-square-meter one in the downtown area. Should rural residents pay more? Should the owners of bigger houses pay more tax?

From the angle of resource conservation, it is necessary to collect property tax on land. At present there is only the land use right transfer fee, no property tax.

To impose property taxes on land will increase the cost of accumulating land and help curb land speculation. But according to our current economic system, there is no basis for collecting property tax on land because rural land is collectively owned and urban land belongs to the State.

This seems to be a predicament, which indeed shows the defect in our land system. So, in my opinion, it is essential to reform the land system before introducing the property tax.

Once the taxable holdings include factory buildings and land, it would be even more ridiculous to tax only according to the area.

Then there is the question of how to measure property values. The self-reporting method adopted by many Western countries is a good one. Enterprises normally would not underreport their property value because there are related mortgage loan issues.

Families would not underreport the value of their property because of the possibility of government buy-outs. Should the government need to demolish their homes, they would not want to be paid an undervalued price.

The author is a researcher with the Rural Development Institute at the Chinese Academy of Social Sciences


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