New taxes should be aimed at specific targets to curb speculation and help develop a healthy realty sector
News of an extension of the property tax pilot scheme has spread across China through both government and non-government channels. Amid signs of rising housing prices in recent months and the warming of the real estate market, the news was not totally unexpected.
According to recent China Index Academy data, prices of new houses in major cities continued to rise in August, with the average in 100 cities increasing for the third straight month to 8,738 yuan ($1,378) per square meter, an increase of 0.24 percent from July. In August, new housing prices in 10 first-tier cities such as Beijing and Shanghai increased 0.45 percent month-on-month.
Since China's economic slowdown has not been checked and government efforts to regulate the real estate market is at a crucial stage, an experiment to extend the property tax to other cities, if well designed and effectively implemented, will help free local governments of their long-time dependence on "land revenue".
Shanghai and Chongqing first introduced the property tax pilot scheme in early 2011 amid intense government efforts to curb skyrocketing property prices.
The implementation of a scientific property tax will also help lay a solid foundation for taxing the speculation-prone real estate sector and raise hopes of establishing a long-term and stable market to facilitate its healthy development. At the same time, an effective property tax system is also expected to create the right environment for phasing out the ongoing administrative measures aimed at curbing speculation in the housing market.
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