BEIJING: China is set to expand pilot property tax reforms, state media reported, as the government battles real estate speculation in the world's second-biggest economy.
China's housing market took off after key 1998 reforms sparked a building boom on the back of rapid urbanisation and wealth accumulation. But as prices soared, so did worries about wealth disparity and the resulting potential for social instability. China's top legislature, the National People's Congress Standing Committee, on Saturday approved the latest plan to promote "rational housing consumption", according to the official Xinhua news agency.
Under the five-year pilot scheme, Xinhua added, property tax will be levied on all types of real estate, excluding some rural homes. Further details, such as its start date and target areas, are expected to be disclosed at a later date.
The announcement comes with President Xi Jinping pushing for more "common prosperity" in China aimed at spreading wealth more evenly. In 2011, authorities started trials in Shanghai and Chongqing targeting high-end private residential properties for taxation.
There have been talks to expand such taxation, but localities have been reluctant, worried it will drag down property values and dampen demand for land, a key source of local government revenue, state-run tabloid Global Times said Saturday. China's real estate sector is in troubled waters, with home sales slumping 16.9 percent on-year in September and deeply indebted property giant Evergrande battling a liquidity crisis.
Some analysts believe, however, the latest tax move is aimed at preventing prices from rebounding to earlier levels. "The chances of a national tax being implemented are much higher now," said Mark Williams of Capital Economics last week as reports emerged that a plan was being stalled.
Opposition to the tax from insiders was not new, he added, given that correlation between Communist Party membership and ownership of multiple properties is "probably fairly high".
"But demographics mean the 25-year property boom is ending," he said. "Land sales are not a sustainable source of government revenue anymore. A modest property tax could be."
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