Property tax progressing, advisers say

Political advisers have identified some of the key areas for legislators drawing up China's first property tax, including who will set the rates.

The legislation, under discussion for several years, is seen as an essential part of the structural reform to improve local governments' tax systems, Liu Shangxi, head of the Chinese Academy of Fiscal Sciences, said on Saturday.

"The legal framework is expected to clarify whether provincial governments will be able to determine their own tax rates" based on local conditions, said Liu, who is a member of the National Committee of the Chinese People's Political Consultative Conference.

He said decisions are also expected on how much of the tax will go to a local government's coffers, as well as who is expected to pay－all homeowners or just those with multiple properties.

Liu suggested making property tax a type of regulation tax, meaning that it would only start to be levied on individuals after they have acquired a certain number of properties, pushing them over a threshold, which would save housing resources and narrow the gap between rich and poor.

"Property tax is necessary now, but everything should wait until the draft legislation," he added.

The Chinese government is working on a long-term mechanism to support stable and healthy development of the property market, to push forward structural reform and prevent potential risks.

Liu Shijin, former deputy head of the State Council's Development Research Center, has predicted local authorities will probably have relatively large discretion over tax rates and collection.

Issues of public concern will be considered during the legislative process and reasonable solutions will be found, Liu, a CPPCC National Committee member, told Securities Times.

Xiao Jie, the finance minister, wrote in a People's Daily article that China's property tax will be a crucial part of the next phase of reform.

"The tax will be charged based on assessed values of commercial and industrial properties, as well as personal residential housing," he said.

Louis Kuijs, head of Asia economics for Oxford Economics, said putting property tax on the legislative agenda in 2018 could mean introducing it in parts of the country in late 2019 or 2020.

"While we think a property tax is important as a stable revenue source for local governments, the initial rate is likely to be set fairly low," he said.