Home » Cheng Xiaonong: How does the real estate tax change the future of Chinese middle-class families? | House Prices Rising | Luxury Homes | National Network

Cheng Xiaonong: How does the real estate tax change the future of Chinese middle-class families? | House Prices Rising | Luxury Homes | National Network

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[Epoch Times November 06, 2021]Real estate is the main component of Chinese household assets. On average, about 70% of urban households’ household assets are the value of real estate. The CCP recently announced that it is about to start a multi-regional trial of real estate tax collection. Real estate tax is undoubtedly a major impact on urban middle-class families, and it is related to whether the family property of each household has shrunk and whether the standard of living will change in the future. In the upcoming episode of the “Interview with Fang Fei” on NTDTV, I analyzed the CCP’s taxation of property taxes, but it’s unreasonable; private land related to urban real estate was not suddenly caught by the CCP until 1982. Confiscated. This article does not repeat those contents, mainly analyzes the list of possible pilot cities, the scope of real estate taxation and the real estate tax rate, so that readers have a preliminary understanding of these issues.

1. Where does the real estate tax pilot program start?

On October 23, the Standing Committee of the National People’s Congress announced that it authorized the State Council to carry out pilot projects for real estate tax reform in some areas. The pilot period will be 5 years; according to the implementation of the pilot, the National People’s Congress may formulate a national real estate tax law and roll it out across the country in 5 years.

The list of pilot cities will be announced at the end of this year, and the pilot cities will start real estate tax collection starting next year. People from China will be concerned about whether the place of their home or their family’s residence belongs to the pilot city. The exact answer is not yet known. In late October, many eye-catching speculations about pilot cities appeared on the domestic Internet, and many messages were deleted after going online, indicating that these speculations themselves are not reliable.

But there are also some messages that provide clues. According to the “Wall Street Journal” report, Zhongnanhai’s intention to fully implement a real estate tax was met with great resistance. Initially, it proposed pilot projects in 30 cities and then reduced it to 10 cities.

“Economic Observer Network” reported on October 23 that relevant departments this year consulted the four cities of Shenzhen, Hangzhou, Suzhou, and Jinan, asking them “whether they support the pilot collection of real estate taxes in the local area?” In May, the Ministry of Finance, When the State Administration of Taxation and the Ministry of Housing and Urban-Rural Development held a real estate tax symposium in Beijing, the leaders of these four cities all participated. In addition, Shanghai and Chongqing, which have been piloting real estate tax for 10 years, also participated in the symposium. According to the analysis of “Economic Observation Network”, these six cities have several characteristics. First, the economy is developed and the pilot projects have little impact on economic fundamentals; second, the housing prices of some of these cities have risen rapidly; third, the income from land sales in these cities in the past Relatively high, we can observe to what extent the real estate tax can replace the income from land sales.

The CITIC Securities research report released on October 25th believes that the scope of this real estate tax pilot has been further reduced to four places, namely Shanghai, Chongqing, Shenzhen, and Hainan. According to the author, if Hainan implements a pilot program, property taxes will be collected mainly in Haikou and Sanya. If Hainan is willing to experiment, there may be an important reason, that is, many homeowners in Haikou and Sanya are “migratory birds” who live only from the north to the south in autumn and winter every year. Collecting property taxes from these non-local homeowners will undoubtedly expand Hainan Province’s Waist bag. If the final pilot areas are indeed as estimated by CITIC Securities, in fact, among the four pilot areas, Shanghai and Chongqing are just expanding the scope of the property tax collection and increasing the tax rate in the past. There are only two new pilot cities, namely Shenzhen and Hainan.

2. Whose house is taxed?

Once the cities mentioned above are declared to be pilot cities for real estate tax, people are naturally concerned about whose house will be taxed.

Judging from the old real estate tax pilots implemented in Shanghai and Chongqing from 2011 to now, the scope of taxation is very small. Shanghai targets the second or more houses newly purchased by residents of this city and new houses purchased by non-residents of the city; Chongqing targets single-family houses owned by individuals, newly purchased high-end houses, and those who have no household registration, no business, or no residence in Chongqing. New housing for working individuals. The difference between the old pilots in the two places is that Shanghai levies real estate tax on people who own multiple apartments, while Chongqing mainly levies real estate tax on high-end luxury homes.

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Shanghai and Chongqing may still be selected for this new version of the real estate tax pilot, which shows that the past taxation scope of these two places will no longer be simply extended. If the Chinese Communist Party only considers collecting taxes according to the original taxation scope of these two cities, then these two places have been levying taxes according to the old version for ten years. Why do they need to try again? Now that these two cities have been included in the new royalty collection pilot, it shows that the scope of the new version of real estate tax collection must be larger than that of the old version.

How can the scope of expropriation be expanded? In fact, some clues can be seen in combination with the scope of the old tax collection in Shanghai and Chongqing. In Shanghai, real estate tax was imposed on the second and above houses in the past, which is a tax on real estate other than necessary houses; while in Chongqing, luxury houses are taxed. The so-called luxury house is nothing more than a large housing area; whether it is a single-family house or a high-end apartment, the area is much larger than an ordinary apartment in a residential building. Therefore, the tax collection method used in Chongqing in the past was actually an area tax.

If the levy scope is expanded in Shanghai next year, it means that the homeowner’s single residence may also be included in the taxation scope, because the tax on the second and above properties has already been collected; further expansion of the scope will only be for single residences. Housing now. In Chongqing, when the scope of levy is expanded, taxes have already been collected on luxury homes, and further expansion of the scope in the future will inevitably target ordinary-grade housing.

From this point of view, the scope of the new version of the real estate tax is likely to be calculated based on the number of sets and the area. The so-called number of units means that all houses other than the house where I live are taxed; the so-called area, even if the owner only has one suite, but the area is large, a certain exempt area may be deducted based on the number of family members, and the remaining Real estate tax is levied on the area under. The research report of CITIC Securities disclosed that pilot cities may set a per capita exempt area of ​​40-60 square meters. Therefore, homeowners of small houses do not have to worry about collecting taxes, while homeowners of large single houses may enter the scope of tax collection.

3. Can divorce avoid taxes?

What the Chinese are best at is “there are policies at the top and countermeasures at the bottom”. After the news of real estate tax came out, some people have begun to use their brains to see how to adjust the population to achieve the purpose of tax avoidance. In this regard, there are usually two kinds of thinking. One is for two suites, and the other is for large-area residences.

The first thing to note is that some people who don’t understand the CCP’s preparations for real estate tax may have unrealistic ideas, thinking that the government of the city where the hukou is located cannot grasp the situation of the real estate they own in a place other than where they are registered. Maybe you can slide over. In fact, the CCP authorities have established an online search for real estate information in different places. In the past few years, the Ministry of Housing and Urban-Rural Development has been trying to establish a unified national real estate registration system to collect housing registration and transaction data, and then realize national networking and real-time inquiry. In June 2018, the nationwide network of the unified national real estate registration information management platform has been completed, and the real estate registration systems in various regions have been unified and connected to the grid; and recently, online signing services for home purchases and sales have begun in some cities. In this way, with the final completion of the registration of real estate in various places, the “One Net” of the national housing information will grasp the information of the owners of houses in different places. If someone owns a house in another place that is not included in the pilot city, he still has 5 years to deal with these properties; if the pilot tax collection is started in the place where the house is located in another place, the homeowner will still do it even if he lives in another city that has not yet been piloted. Receive tax bill.

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Speaking of trying to avoid taxation, couples who own two houses may think that after the divorce, if the two houses are changed to be owned by the divorced spouse, the real estate tax will be exempted. It is said that some people have already started to operate. However, this real estate tax collection may still have the problem of exemption area. In this case, the use of divorce as a tax avoidance method requires specific calculations. If the two suites are 80 square meters and the exempt area is 40 square meters, then no divorce is a set of exemptions and a full set of exemptions; after divorce, there is only one owner of each set, and each set has a 40 square meter exemption. The total tax area is the same as the amount of tax paid without divorce, which is equivalent to “one set is exempted and one set is fully levied.”

For homeowners with a large area of ​​residence, how to reduce the taxable area depends on increasing the exempted area; and increasing the exempted area requires an increase in the permanent population. In the past few years, many families in first-tier cities have bought low-quality and small-area school district houses in order to allow their children to enter a good school district. In addition to buying school district houses, there is another way to transfer their children’s household registration to the elders in the school district. Under the name of the address. However, different cities have different regulations on the resident population under one address.

Now, this kind of experience of playing “school district hukou” plays a role in the issue of real estate tax avoidance. If the size of the elderly’s own houses is relatively large, some elderly people may think of transferring their grandchildren’s hukou, like transferring their grandchildren’s hukou to a good school district address, to increase the number of permanent residents and thus increase the exemption area. However, the city’s regulations on valid household registration must have lived for several years, and whether the grandchildren’s name must be listed on the real estate registration, this needs to be known in advance. Even if these problems can be resolved, the transfer of the grandchildren’s household registration will also change the permanent population of the children’s residence; in other words, it may eventually become a tax burden between relatives and families.

4. How high is the real estate tax rate?

Everyone in the pilot cities will be concerned about the issue of the tax rate in this trial of levying real estate tax. How much tax should be collected? This depends on the taxed area on the one hand and on the tax rate on the other. The tax rate can have two aspects of reference information.

In the past ten years, Shanghai and Chongqing have been part of the pilot real estate tax cities. Shanghai’s real estate tax is a fixed tax rate, levied annually at 0.6% of the real estate valuation, and the annual tax is more than 20 billion. Chongqing’s real estate tax is a progressive tax rate. , Divided into three levels: 0.5%, 1% and 1.2%. Judging from the CCP’s plan to choose a number of pilot cities to implement the new real estate tax and to roll it out to the whole country, the tax rate of the new real estate tax pilot area may not be set too high, otherwise it will be difficult to promote it in other places; but it is possible A progressive tax rate is adopted, and a higher tax rate will be adopted for a small number of families who insist on owning multiple houses or holding luxury homes.

The research report of CITIC Securities believes that each pilot city will determine the local real estate tax rate on its own, and the overall tax rate is expected to be between 0.2% and 1%. If this view is proved to be true, for a homeowner with only one house, the taxable area outside the exempt area may be subject to the lowest tax rate, such as a few tenths of a percent; and the tax rate for the second house or luxury house , It may reach a progressive tax rate of 1% or higher on average.

The calculated value of the taxed real estate should not be the purchase price, nor the market price that fluctuates at any time. Instead, it should refer to international experience to evaluate the real estate value at 50% or 30% of the market price to calculate the real estate tax. According to the research report of CITIC Securities, there are two considerations for doing so. First, the city government has already collected fees based on the value of the real estate when the land is transferred. These fees have been transferred to the house price by the real estate company and should not be included in the tax base again; second, the owner does not have the ownership of the residential land, only the land 70 years of service life, so a discount is necessary to estimate the tax base.

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In fact, even if the tax base of real estate tax is calculated based on a 50% or 30% discount of the house price, this is also a “bad tax”. The reason why it is not said to be “illegal taxation” is because the CCP has never been able to administer it, and the Constitution and laws are nothing but “plasticine” played in the hands of the CCP. The evil of this “evil tax” is that the housing itself is far less than 50% or 70% of its market value. To levy real estate tax at this ratio is already a malicious tax collection.

According to Ren Zeping’s analysis in his book “Real Estate Cycle”, in 2015, the composition of housing prices in the 11 cities of Beijing, Shanghai, Guangzhou, Shenzhen, Hangzhou, Tianjin, Nanjing, Wuhan, Chongqing, Chengdu, and Suzhou was construction and installation expenditures. It only accounts for 11% of the house price, while the cost of land is as high as 40% of the house price, and the tax cost accounts for 16.7%. The cost of land plus tax accounts for about 60% of the house price. In other words, when the homeowner buys a house, he has paid the government through the real estate company for the land value and infrastructure construction costs necessary for residential development. These expenditures account for 40% of the house price; The income tax on property is undoubtedly taxed repeatedly every year.

5. The micro and macro consequences of imposing a real estate tax

The CCP has now entered the stage of “scraping oil” from the middle class. For example, if a homeowner lives in Shanghai and the area of ​​his second suite is 100 square meters, the transaction price of commercial housing in Shanghai at this moment is 39,631 yuan per square meter. Based on this average house price, the market value of his taxable property is close to 4 million yuan; the estimated value of the taxable property is 2.8 million yuan at a 30% discount. If the real estate tax is paid at the annual real estate tax rate of 1%, he will have to pay 28,000 yuan a year; while the average annual salary of urban employees in Shanghai last year was 120,000 yuan. After deducting personal income tax and social security contributions, the average annual salary per person The disposable income is about 80,000 yuan; this 28,000 real estate tax is equivalent to one-third of his after-tax purse every year.

In the past, people who own multiple suites tended to rent out the house, use the rent to pay the mortgage, use the house to maintain the house, and then wait for the increase in real estate prices to bring value. However, after the real estate tax was levied, in addition to the mortgage payment, the homeowner added a large amount of real estate tax; this real estate tax is difficult to pass on to tenants who have no money to buy a house, because tenants will not increase their personal income due to real estate tax levy. income. Many people will sell second-hand houses after the loss of housing maintenance; while the number of sellers in the second-hand housing market has increased, but buyers have become fewer and fewer, housing prices will definitely fall. In the future, holding real estate may no longer be holding a “cornucopia”, but holding a “bottomless pot” of constant loss of family property. Among the property composition of urban middle-class families, the proportion of real estate value will gradually decrease. This is not only related to the decline in housing prices and the shrinking of family property, but also to the realization of multiple properties by homeowners.

The macroeconomic effects of real estate taxation must be negative. The financial assets of middle-class families are taken away by real estate tax every year. Coupled with the shrinkage of real estate value, it will inevitably affect the expenditure of many families. They can no longer be as lavish as they used to be backed by real estate value. As a result, the consumption of the overall economy will decrease, leading to a further depression in the service industry and manufacturing industry. When the real estate tax was rolled out across the country, it was a time when the very satisfying lives of Chinese middle-class families fell.

The Epoch Times

Editor in charge: Zhu Ying

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