China renews pledge to push property tax expansion

The long-discussed expansion of China's property tax plan has once again come under the spotlight following a renewed pledge by tax authorities to research the plan. The State Administration of Taxation (SAT) said in a circular issued late Tuesday that it will research the possible expansion of property tax pilot programs. However, like similar statements previously made by other authorities, the circular did not include any details regarding a timetable for the expansion. The comment is the latest in a string of official statements in which authorities have vowed to implement a property tax plan currently being used in the cities of Shanghai and Chongqing. Despite repeated emphasis, the government has yet to make any substantial moves regarding the property tax, although recent media reports indicate that several cities, including Hangzhou, Wuhan and Xiangtan, are ready to implement the plan. "The stagnation suggests that multiple factors are holding the expansion back," said Chen Guoqiang, vice president of the China Real Estate Society, citing reluctance from local governments and other interest groups as major reasons for the stagnation. The government introduced property taxes in Chongqing and Shanghai on a trial basis in 2010 as part of efforts to cool the property market down amid growing public complaints about skyrocketing property prices. The Chongqing trial focused on taxing high-end housing, while Shanghai's program mainly targeted the ownership of multiple houses. But due to limited rates that ranged from 0.5 to 1.2 percent, the taxes imposed were seen as too low to be effective in keeping local housing prices in check. However, analysts believe the property tax program will be expanded, as the government sees it as a tool that can be used to regulate the market in the long term. Zhang Dawei, director of Centaline Property's research center, said he expects the expansion to be announced in the third or fourth quarter of the year, most likely in second- and third-tier cities. But the expanded property tax programs are not likely to cover all types of property, he said, adding that the expansion will likely follow the models used in Shanghai and Chongqing in that it will mainly target the ownership of high-end homes and multiple houses.