Property tax trials yielding meager results, say analysts

Policymakers have to ponder whether to expand pilot program after it fails to halt rising home prices, reports Wang Ying from Shanghai

It has been three years since China launched trials of property ownership taxes in Shanghai and Chongqing, but the goals of the duties, which include combating speculation in property market and reining in the home price rises, are far from being achieved.

It is now a thorny question for policymakers as to whether to expand the pilot program beyond the original cities, analysts said.

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In January 2011, China started to levy property taxes on homeowners in Shanghai and Chongqing municipalities.

In Shanghai, if a family has a housing area of more than 60 square meters per person, it will be taxed at a rate of 0.4 percent or 0.6 percent of the total property price annually, depending on the apartment's price per sq m. If the price is above 27,740 yuan ($4,570) per sq m, the rate was 0.6 percent in 2013.

In Chongqing, the trial tax is focused more on taming investment speculation in high-end properties, with the rate set between 0.5 percent and 1.2 percent of the property price annually.

But the two cities' real estate prices, along with other major cities, have continued to rise in the past three years. Data released by the National Bureau of Statistics showed that new home prices in Chongqing in December soared 14.3 percent year-on-year, while new home prices in Shanghai surged by as much as 24.3 percent from a year earlier.

In addition, another goal of the pilot tax plan, which is to integrate and optimize China's taxation system and promote fair redistribution of resources, seems as far off as it was three years ago.

"Annual collected property tax has been about 100 million yuan in Chongqing, only accounting for 0.03 percent of the local government's total revenue," the Beijing Youth Daily reported.

This amount is in stark contrast with the land sales revenue in the southwestern city, which amounted to 116.4 billion yuan in 2013, lagging behind only Beijing and Shanghai.

In Shanghai, China's financial hub, the property tax collected in the past three years totaled about 600 million yuan, way below the aggregate 217.8 billion yuan land sales revenue during the same period, data compiled by property agency Centaline showed.

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