Politics push China's property tax towards Beijing

China's capital could be the next major testing ground for a national property tax, putting the central government at risk of vocal criticism close to home that underscores its determination to roll out an unpopular fiscal plan that has been a decade in the making.
Premier Wen Jiabao's opening address last week to the largely rubber-stamp annual meeting of parliament, the National People's Congress (NPC), made it crystal clear that the leadership will push ahead with property tax reform. But a chorus of carefully nuanced complaints from officials in relatively rich coastal provinces which are expected to join Shanghai and Chongqing in the property tax test has likely forced Wen to experiment on Beijing instead, where he risks the ire of retired state workers and officials. "I'm against it," Zhang Xiaoji, officially a pensioner, but also a senior researcher at a think tank under the powerful National Development and Reform Commission, and a member of parliament's advisory body, the Chinese People's Political Consultative Conference (CPPCC), which meets alongside the NPC.
"Old men like me have retired. We've worked our life for the country and got a home as welfare from the state. Now if we are ordered to pay property tax, it is very unjust, isn't it? What do we have to do with home prices?" Zhang told Reuters. Beijing has a high concentration of vocal and influential pensioned-off officials living in homes subsidised, or given directly to them, by the state in a city that has seen some of the steepest property price rises in the country. It makes a universal tax based on property size, location and value particularly unpopular.
The government's plan for a nationwide property tax is designed to consolidate existing levies and replace a slew of restrictions on multiple and speculative home purchases that had seen property prices surge 10-fold in a decade, until a two-year tightening campaign began to bite in the autumn. There's plenty of work to do to get the tax code defined and persuade homeowners it will not simply be an extra burden.
Right now, it is. Roughly a third of the purchase price of a home goes to the government as land cost, with a one-off transaction tax and an annual bill for property maintenance. To limit the burden, Chongqing and Shanghai set low rates of between 0.4 percent to 1.2 percent of a home's price and exempted the majority of local home owners. But that led to only a trickle of income, discouraging revenue-obsessed officials from imposing it and raising questions about its effectiveness. Chongqing raised only 100 million yuan ($15.9 million) from the new tax, versus 82 billion yuan from land sales. Shanghai raised 300 million yuan versus 151 billion yuan via land sales.