China will broaden the scope of its property tax trial in order to curb speculation

Compass Cambodia report - China's government plans to expand trial property tax reforms, according to official media, as it fights real estate speculation in the world's second-largest economy.

China's housing industry exploded following crucial changes in 1998 spurred a construction boom fueled by rapid urbanization and wealth growth. However, as prices rose, so did concerns about wealth disparity and the resulting risk of social unrest. According to the official Xinhua news agency, China's top legislative, the National People's Congress Standing Committee, approved the newest plan to encourage "rational housing consumption" on Saturday.

Property tax will be collected on all forms of real estate, with the exception of some rural dwellings, under the five-year pilot scheme, according to Xinhua.

More information, such as the commencement date and target locations, will be released at a later date.

The statement comes as President Xi Jinping pushes for more "shared prosperity" in China, with the goal of more equally distributing income.

Authorities began trialing high-end private residential properties for taxation in Shanghai and Chongqing in 2011.

According to the state-run tabloid Global Times, there have been talks to increase such taxing, but cities have been hesitant because they fear it will lower property values and discourage demand for land, which is a vital source of local government revenue.

With home sales down 16.9% year on year in September and highly indebted property behemoth Evergrande facing a liquidity crisis, China's real estate market is in peril. However, some analysts feel that the latest tax move is intended to prevent prices from returning to previous levels. "The chances of a national tax being adopted are significantly higher now," Capital Economics' Mark Williams said last week, as news surfaced that a scheme was blocked.

Insider opposition to the tax was not new, he continued, given the "probably fairly high" association between Communist Party membership and multiple property ownership.

"However, demographics indicate that the 25-year property boom is coming to an end," he said.

"Land sales are no longer a reliable source of revenue for the government. It's possible that a small property tax will suffice."

Source: Compass Cambodia comprehensive arrangement, AFP

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