China to reform real estate tax to slash housing prices

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Last updated at: (Beijing Time) Monday, March 15, 2004

China to reform real estate tax to slash housing prices

China is considering imposing a unified real estate tax, which experts say will help slash presentsky-high housing prices by as much as 50 percent, Monday's China Daily reported.

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China is considering imposing a unified real estate tax, which experts say will help slash presentsky-high housing prices by as much as 50 percent, Monday's China Daily reported.

Currently, a land leasing system in China has guaranteed home owners to enjoy land use rights for between 50 and 70 years. Real estate developers have turned the landing leasing charges and other numerous taxes and fees into housing costs.

International practices suggest that the cost of construction accounts for about 72 percent of the total housing price, while land costs, taxes and profits account for the remaining 28 percent.

But in China, spending on construction accounts for only 42 percent, while land leasing fees, profits, as well as other taxes and fees, take up 58 percent.

In some cities, developers will have to pay as many as 200 types of taxes and fees to the local government.

The current high housing prices were mainly a result of these heavy taxes and fees, which had shattered dreams of many ordinary people wanting to buy decent private homes, the report said.

A 60-square-meter apartment unit is worth an average of at least 360,000 yuan (43,373 US dollars) in Beijing, which is over 10 times the average annual income of a common family.

Meng Xiaosu, president of the China Real Estate Development Group, said the existing land system did not comply with market rules and had caused chaos on the real estate market.

Zhang Peisen, a senior researcher with the Taxation Research Institute, said the unified real estate tax was designed to replace existing taxes and fees, including the urban real estate tax, land use tax, land value-added tax and land leasing fees.

Under the new system, home buyers would not be required to pay those taxes and fees which developers add to the cost of buying a home at one time.

Source:Xinhua

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