China advances property tax reforms amid slowdown

Unlike the private land ownership system practiced in western countries, individuals can only possess land use rights in China, where land is either state-owned or collectively-owned. This has added to the difficulties for the legislation work, according to Zhuang.

With a real estate tax, a homeowner has to pay taxes in proportion to the monetary value of their housing at a certain tax rate each year. In China, taxes are currently imposed only when a housing transaction takes place, which makes it easier for speculation.

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While hailing the role of the Shanghai and Chongqing trials in changing public expectations and increasing social consensus for property tax reforms, Jia said the trials will also provide valuable experience for the reforms.

Despite the trials, debates have been going on over whether the tax package can really help regulate the market. Some worry that it will become a new burden for the country's already-suffering home-buyers.

Shen Jianguang, chief economist at Mizuho Securities, said that as a way to make up for the deficiency of the market mechanism, a properly designed tax system will effectively reduce speculation and help contain rapid price gains.

Authorities have so far refrained from introducing fresh administrative measures since the new leadership took office last year, reflecting an intent to let market forces correct the market.

Zhu Zhongyi, vice president of the China Real Estate Industry Association, said the current market slowdown provides an opportunity for the government to advance property market reforms.

Oversupply, lending difficulties and the bearish sentiment of home-buyers has weighed on the country' s property market. More Chinese cities posted month-on-month home price drops in the first half of 2014, and property investment growth has also slowed.

A draft regulation on the establishment of a real estate registration mechanism, which was submitted for discussion at a State Council meeting last month, is expected to be published to solicit public opinions soon.

The mechanism, together with a system to record individuals' housing ownership, is poised to pave the way for legislation of the tax package.

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