Real estate tax to help normal homebuyers

A woman talks with a salesman at a property market fair in Hangzhou, Zhejiang province.[Photo/China Daily]

Real estate tax should be promoted according to the principles of legislation, and the process should be carried forward gradually. Enacting real estate tax legislation is a lengthy process, and the authorities should prudently differentiate the tax levying methods on sold houses and houses to be sold in the future.

To make the collection of real estate tax easier, the local authorities could be allowed to devise innovative methods to levy the tax in accordance with the actual situation of the local property market. In fact, the levying of real estate tax may be expedited gradually.

Besides, real estate tax should be based on the appraisal of the house in question, for which the situation in the neighboring housing market as well as the cost of furnishing and decorating a house should also be considered.

Real estate taxation can benefit society in three aspects. First, real estate tax is in line with the orientation of China's fiscal and taxation system reform, which in turn is conducive to the reform of immovable property tax. And the policies on real-estate-related taxes and fees, such as property fee and real estate value-added fee, will be optimized and adjusted accordingly.

Second, real estate tax can better facilitate fiscal transfer, by raising the funds for public finance, which will help build public infrastructure and public rental housing.

And third, real estate tax could curb the soaring housing prices to some extent, which is what the public wants most.

Many factors contribute to the soaring housing prices. And by making speculation and stocking up houses much more expensive, real estate tax will prevent many people from doing so, simply because the cost of holding on an extra house may not necessarily be offset by its sales price. As a result, more people will think twice to purchase more than one house, leading to static, if not falling, housing prices.

Real estate tax, which incorporates house property tax, is a new kind of tax that will be levied at the transfer of possession stage. Some taxes levied during the trading process could be exempted or adjusted if the new tax is imposed. In particular, the authorities may review whether the contract tax and individual income tax are being levied twice on the house owner.

But whether the rate and collection process of real estate tax will be adjusted depends on the implementation of the property registration system. And if local real estate registration information platforms are connected nationwide, it will become less difficult to levy real estate tax.

It is likely that two different methods of collecting real estate tax will be followed－one for sold houses and the other for houses to be sold in the future. Also, real estate tax may be imposed differently on different types of properties.

The house property tax on property that has already been bought will be imposed prudently. The house property tax will mainly target unsold housing, so new housing transaction will be affected the most.

A main purpose of collecting house property tax is to adjust taxation in the real estate sector, because the aim is not to simply increase the tax burden on the people. So the cost of holding a house for ordinary homeowners who have one or, at best, two houses will not increase substantially.

The author is a senior researcher at E-house China R&D Institute.