On March 16, the Ministry of Finance stated on the pilot work of real estate tax reform, considering all aspects of the situation, that it does not have the conditions to expand the pilot cities for real estate tax reform this year. That is to say, the real estate tax reform and expansion of pilot cities, which were previously included in the legislative plan and planned to be vigorously promoted, will be put on hold for the time being.
Judging from the event of suspending the promotion of the expansion of the pilot cities of the real estate tax reform, it shows that there is still obvious resistance to the real estate tax reform. This resistance may come from the pressure of the macroeconomic performance, the downward pressure on the real estate market and the pressure on the work arrangement of the tax department. However, judging from the public statement of the person in charge of the Ministry of Finance, some cities have indeed carried out investigation and preliminary research, indicating that the real estate tax reform has actually been advanced, and the general direction of the reform will not change, it just needs to be suspended and released. Just slow.
In fact, judging from the logic of last year’s decision to speed up the real estate tax legislation and expand the pilot cities for real estate tax reform, the reason why the real estate tax pilot project has not been advanced for ten years before is not due to the positioning and function of the real estate tax. The major adjustment or change is due to the fact that the land price and housing price that have been continuously pushed up by land finance over the years have caused a ceiling effect in the development space of the industry. While the housing-related risks are continuously accumulating and pushing up, it also makes the most core land finance appear. unsustainable risk. Under the influence of downward expectations, sluggish consumption, uncertainties in exports, counter-cyclical adjustments and the increase in expenditure and income caused by the epidemic, finding alternative tax sources and sources for land finance has become a task to maintain local government. Fiscal stability priorities and imperatives.
However, since the second half of last year, the property market has turned sharply weak under the long-term and continuously strengthened control measures, which has led to a sharp contraction and decline in the liquidity of the industry, and triggered the thunderstorms of many top 100 private housing companies that have continued to this day. Since the fourth quarter of last year, under various measures and policies to promote the market recovery, the real estate industry still has no obvious signs of recovery. It will have a considerable impact on the sustainable development and smooth transformation of the industry, as well as on the smooth operation of the macro economy, as well as on land finance, financial security and employment. If we continue to forcibly promote the expansion of urban pilot projects for real estate tax reform in this market state, the confidence in the industry that has not yet recovered and the property market that is still going down will undoubtedly make things worse. Therefore, the Ministry of Finance proposed that “there are no conditions for expanding the pilot cities of real estate tax reform within this year”, which can be said to be a response to the market situation and the actual situation of economic operation, which is in line with the current reality and is laudable.
As the largest industry and pillar industry of the national economy, real estate, despite the high turnover model formed under specific industry development conditions over the years, has brought serious high debt problems and accumulated high real estate-related risks. It has also been called the black swan and gray rhino in China’s economic operation, but the role of the real estate industry in maintaining the stable operation of the macro economy, and even as an important industry handle for counter-cyclical adjustment, is self-evident. The Chinese economy’s “night pot” is an unsophisticated term. In addition, what is more critical is the role of land finance and the credit creation of real estate, which is closely related to the real estate industry, which has become an important support for the operation of the strong government model with Chinese characteristics and the development model of high-speed economic growth through debt.
The slowdown in industry growth caused by the continuous regulation in recent years has not only brought about the general tightness of industry liquidity and even the queuing of the top 100 private housing companies, but also triggered the credit contraction caused by deleveraging and shrinking of balance sheets and the increase in M1. The collapse problem, and even the resulting stalled macroeconomic growth and the decline in the effect of counter-cyclical adjustment policies, and the decline or even decline in the growth rate of land fiscal revenue have exacerbated the pressure on local finances. For the government, the negative impact of the latter two seems to be even more severe, which is why regulators and industry authorities have rapidly turned to regulation since the fourth quarter of last year and continued to increase favorable policies.
Since the beginning of this year, in response to the pressure of the Federal Reserve’s continuous interest rate hikes and the decline in macro expectations, and the counter-cyclical adjustment and hedging policy arrangements and implementation have been made in advance, my country’s national economy has continued to recover. The real estate sector also aims to “stabilize expectations, stabilize land prices, and stabilize housing prices”, and is making comprehensive efforts in finance, fiscal and taxation, entrepreneurship and innovation, and population policies to promote the recovery of industry liquidity and promote the industry to enter the track of a virtuous circle as soon as possible. However, the decision of the Ministry of Finance to suspend the real estate tax reform and expansion of pilot cities fully responded to market concerns and demonstrated the stability and consistency of policy expectations with the macro perspective. It is a pragmatic and efficient decision to help stabilize the macroeconomic market, financial operations and employment. action.
I applaud the Ministry of Finance for its timely and pragmatic decision-making that is in line with market operations, reflects industry needs, and reflects the consistency and systematicness of macro policies. (Fortune Chinese Network)
The author Bai Wenxi is a columnist for Fortune China.com and Chief Economist of IPG China.
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Editor: Liu Lanxiang