Property tax reform plan welcomed

Learning experience

Although details of the pilot plan have not been released, experts said it would take tax regimes in mature markets into account and adapt them to the situation in China.

In 2011, Shanghai and Chongqing became the only two cities in China to introduce a property tax.

In Shanghai, the levy applies only to families with a total housing space of more than 60 square meters per person, and the taxation rate is either 0.4 percent or 0.6 percent of the property's annual valuation, based on the price per sq m.

In Chongqing, the rate is set between 0.5 percent and 1.2 percent of the annual valuation－an indication that the trial tax is focused mainly on taming speculative investment in high-end properties.

The two cities mainly levy the tax on homeowners with a large number of properties, with various deductions and exemptions being made.

Jia, who agreed that there could be changes to the tax trials in Shanghai and Chongqing, said: "Some observers commented that the trials in these two cities were too soft to impact home prices, but I think that is out of cautious consideration. Nobody wants to see a brand-new experiment mess up the local property market, and through previous experience, we may easily reach a consensus on more trials."

Macdonald said, "Part of the initial trial was about the mechanism for enforcing and collecting property taxes, so there may now be adjustments to the rates charged, the properties that are subject to the tax, or the exemptions allowed."

He said property tax is widely collected in the United States, mainland Europe and the United Kingdom. Although there is no perfect system, there is a comprehensive ownership database, accurate and consistent valuation methodology, a clear rate structure and exemption policy that ensures fairness, ongoing monitoring and review of the property tax system, and coordination between government agencies.

Ren Zeping, chief economist at Soochow Securities, said, "Regardless of their various policies, property tax raised in the US, UK and Japan is either based on rents or the valuation of the property, and it can be deducted, postponed or cut for people meeting special requirements."

In the US, seniors, the handicapped and the low-income population are among those entitled to property tax cuts, Ren said. In the UK, by limiting spending, local governments effectively strike a balance between their budgets and the amount collected in tax. The tax generated in the UK is mostly spent on public services offered by local administrations, he added.

Li Chao, chief economist at Zheshang Securities, said, "Property tax in the US and Japan mostly focuses on providing funds to local governments, but it plays a limited role in regulating the real estate market and the economy, facilitating urban development and public spending."

By trialing a real estate tax, China could learn from the experience in the US and Japan to increase local government revenue, boost local initiatives, and promote development of national common prosperity, Li added.