Saturday, 7 January 2012

Mainland mulls expanding tax to more cities

Guangzhou, Nanjing next to face levy on property deals after trial runs in Shanghai, Chongqing

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Guanyu 道 said...

Mainland mulls expanding tax to more cities

Guangzhou, Nanjing next to face levy on property deals after trial runs in Shanghai, Chongqing

Peggy Sito
07 January 2012

The central government may expand its pilot property tax scheme to Guangzhou and Nanjing and some second- and third-tier cities, according to a researcher at the Ministry of Finance.

Jia Kang, the head of the ministry’s Institute for Fiscal Science Research, said Beijing might launch the scheme in other major cities, citing Nanjing and Guangzhou as examples.

Jia was quoted by the Shanghai Securities News as saying the scheme could also be extended to smaller cities in the central and western parts of the country.

Last month, he said the overall direction of the tax scheme had been decided, and that the tax would gradually replace restrictions currently in place to regulate property prices.

The central government has been considering the property tax for nine years. A pilot scheme was launched last year in Shanghai and Chongqing.

The tax in Shanghai is fixed at 0.6 per cent, but charges 0.4 per cent for units bought for less than twice last year’s average for new private homes. Chongqing charges 0.5 per cent of the transaction price for villas and flats that cost less than three times the average price. The tax for villas and apartments sold for between three and four times the average price is 1 per cent, and for those that cost more than four times the average, 1.2 per cent.

“I do not expect [the property tax programme] will happen soon,” said Alan Jin, the head of regional property research at Mizuho Securities Asia.

“The government has passed too many property-related taxes but the taxation bureau is too weak in execution.”

But Jin said he still hoped the tax system would replace the home-purchase restrictions soon. “The government should do it sooner rather than later as the curbs on home-buying are interfering with market forces. If it does happen this year, it will be come as a relief for the market.”

The scheme had so far hardly dented demand in Chongqing, he said.

The central government has put limits on the number of flats that can be bought in 46 cities including Beijing, Shanghai and Guangzhou.

According to research by the China Real Estate Index System, a unit of online property news agency SouFun Holdings, home prices in 60 of the major 100 mainland cities surveyed fell last month, up from 57 cities that recorded price drops in November.