Procedural justice is important for government policy

If a tax policy that sets out to cool the housing market makes divorce the only practical way to evade heavy taxes, then it is a bad policy. If the tax policy actually causes housing prices to rise quickly, it is a failed policy. And if the tax policy is made without seeking advice from the taxpayers, it is a wrong policy, says an editorial in the 21st Century Business Herald. Excerpt:

The State Council issued a guideline about a month ago that said the government will levy a 20 percent personal income tax in the sale of private houses, and all local governments should make their own detailed tax policies.

The past month has witnessed the craziest rush in the real estate trading hall of housing administrations in Chinese cities. Both sellers and buyers are eager to accomplish the trade as soon as possible before local governments issue their policies.

The central housing administration said this policy is to curb speculative investment in the housing market, and if the house is the only property of a family or an individual, the tax will be waived. However, if a couple owns two small houses and want to sell the two houses for a bigger one, they have to pay a heavy income tax on one of the two small houses. Or they can divorce to own one house each. Then neither needs to pay the tax.

This policy does not apply to new houses. The prices of both new and old houses rise fast, which is actually counter to the policy's objectives.

Many rich people who own dozens of houses do need to pay the tax if they do not sell their houses. Ironically, the values of their houses surged remarkably because of the policy.

The central government should reconsider the policy makes sense and seek more advice from citizens while making such policies, which is the fundamental guarantee for procedural justice.