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I was isolated in a Shanghai hotel, while interviewing many candidates online for the establishment of the Yinke Holding Research Institute, while preparing for several very interesting research topics. Unknowingly, it has entered the 9th day of isolation.
Yesterday, I saw a picture in the WeChat group listing three issues related to real estate tax. Since the experts of the Academy of Social Sciences are all stumped, it is definitely called “soul torture.”
“At today’s seminar, an academic from the Academy of Social Sciences talked about real estate tax, and someone raised a question:
First, is it a “property tax” or a “real estate tax”? If it is a “real estate tax”, it doesn’t make sense, because the land is not mine, it is state-owned, and you have no reason to tax me; if it is a “real estate tax”, then I just rent state-owned land for 70 years and build a house on it , Taxation must remove the price of the land;
Second, is taxation based on the price at the time the property was purchased or the current market price? If the market price is the standard, then who will evaluate it? Who bears the evaluation fee? How to ensure the fairness of the appraisal price?
Third, real estate is a fixed asset, and fixed assets must be depreciated. The useful life of real estate is 70 years. Should it be taxed according to year-on-year depreciation? He hesitated for a long time and didn’t say why. “
Baidu took a look. This issue first appeared on Weibo in June 2018, and then repeatedly appeared on different platforms, but there were few serious discussions in the comment area.
Yesterday I saw the WeChat group for these three questions, almost gathered China’s top financial experts, but no one answered directly. I am not an expert in real estate tax, so I don’t want to make a rudimentary idea, so I will try to answer it.
In fact, the first question and the third question can be combined. Real estate, the part of the building on the land, is the same as fixed assets such as cars. As long as it is used, it will face consumption and depreciation. But in reality, the reason for the continuous appreciation of real estate mainly comes from the appreciation of the land connected to the real estate.
Therefore, the tax on property ownership should be called “real estate tax” to be precise. Holders of other assets such as automobiles do not need to tax ownership.
People who hold negative opinions on real estate tax often point out that the “land use fee” has been paid when buying a house, but this does not include the part of future land appreciation.
Similarly, car buyers also have to pay for the “right to use” related expenses, because they use the roads and supporting infrastructure public goods built by the country or region, but they do not need to pay for the “right of ownership.”
The value-added of land not only comes from its scarce attributes, but is also closely related to the economic development and construction of the country and region. For example, the surrounding housing prices will rise after the subway is opened.
Generally speaking, the increase in real estate value is closely related to the appreciation of the land during the holding period, but it has little relevance to the individual’s efforts of the owner. People with good property can do nothing and make money while lying down.
Some people say that as long as more people are willing to buy, the value of the property will increase. But in the final analysis, if everyone is willing to buy, it is naturally optimistic about the economic development prospects of the area where the real estate is located.
It makes sense from the principle of “fairness and efficiency” of taxation to levy taxes on such assets related to national economic construction that come from personal efforts.
It is similar to the “capital gains tax” generally levied in other countries. Buying good stocks can also lie down to make money, but when selling them for profit, they need to pay profits tax. Of course, if you lose money, it can also be used to offset other gains.
Of course, some people will say that when I sell my real estate, I sometimes need to pay value-added tax. If I have to pay real estate tax, wouldn’t it be necessary to pay the same value-added tax twice? This is obviously unreasonable.
However, don’t forget that value-added tax is usually limited to transactions with a short holding period. In China, there is usually no need to pay VAT if the holding period exceeds 2 years. Hong Kong requires a holding period of more than 3 years. The original intention of the value-added tax is to prevent short-term speculation, which is clearly different from the original intention of the real estate tax.
Similarly, capital gains tax will also set different tax rates for different holding periods. For example, the tax rate in the United States for a stock holding period of one year is twice as high as the tax rate for a holding period of more than one year.
Capital gains tax will also be exempted for specific groups. Taking into account China’s special national conditions, it is believed that during the trial period of real estate tax in 10 cities, groups that meet the conditions will also be exempted. In fact, the conditions for implementing real estate taxes in Chongqing and Shanghai 10 years ago were very relaxed.
In the past, China’s capital was relatively scarce compared to labor, so it did not levy capital gains taxes as widespread as in other countries. On the contrary, labor bears a higher tax burden. This situation needs to be changed.
Research shows that 70% of the gap between the rich and the poor in Chinese households can be attributed to the gap in property ownership. It is a global practice to narrow the gap between income and wealth through taxation.
Any taxation will produce a certain degree of distortion, but starting from the principle of “fairness and efficiency”, levying taxes on the stock of real estate is the least distortion and the most efficient approach.
It must be pointed out that the practice of low taxes and tax cuts on capital in the past was based on a theoretical assumption that capital is highly mobile, while labor is not. Taxing capital is difficult, and taxing labor is easy.
But in fact, this theoretical hypothesis cannot withstand strict scrutiny. The lowest tax rate for global corporate income is a new tax proposed to solve the problem of capital mobility. Real estate is just a kind of “immobile” capital, and the difficulty of taxation is not high at all.
Here is a simple answer to the second question. Regarding the valuation of houses, it is not technically complicated. We must avoid administrative intervention, but we must believe in the fairness, justice and openness of the market. In Hong Kong, various lending banks have valuations for almost every existing house, which is free and publicly available for inspection. That’s right, you can check the up, down, left and right of your home, as well as the actual transaction price and bank valuation of each other house (a few houses require a surveyor’s door-to-door valuation).
In a huge market and fierce competition, banks are not only willing to pay for advanced valuation techniques, but the valuation gap between them is not big.
In fact, the Hong Kong government also conducts valuations for every house. In particular, the rental value of the house (the rent available for renting) is evaluated every quarter, and rates (the cost of the police to maintain law and order, levied on the users of the house) or ground rent (similar to real estate tax, for the house) are calculated based on this Levied by the owner).
Every year, the Hong Kong media ranks the value of the real estate owned by the richest people based on the rent value that can be queried after the government’s calculation, and the right of personal privacy must be given way.
It should be particularly emphasized that the real estate tax paid based on land appreciation is not directly related to whether the land is publicly owned or privately owned. In the past, KOLs in the real estate industry made big fuss about public ownership and private ownership of land, which was actually just a kind of clever “sophistry.”
If the differences between China and Western countries are linked to the nature of land, it will be concluded that China not only cannot levy real estate taxes, but other systems similar to Western countries should also be abolished, because the former has public land, and the latter has land. private.
Just a few days ago, teacher Zhou Qiren of Peking University mentioned that the government was happy when it heard about taxes, and experts from all walks of life provided a steady stream of basis for tax increases.
My understanding is that Mr. Zhou hopes that the government can streamline the scale without imposing more new taxes. I support the former with both hands and feet, but for the latter, my attitude is to replace the old taxes that are detrimental to “fairness and efficiency” with good new taxes, and strive to reduce or maintain the overall tax burden of the people.
I have absolutely no intention to provide a basis for the levy of real estate tax, but I think it is absolutely necessary to clarify the various untenable “sophistry” in the current society.
I think that with the current economic downturn, the timing of the real estate tax is indeed questionable. Like others, I believe that, based on the reality of China, the levy of “vacancy tax” is more conducive to fairness and efficiency than “real estate tax”.
I also remembered a past event. Two highly respected and respected old economists in China hold completely different opinions on the question of whether taxes should be paid for the land and housing value added to the construction of the country or region mentioned earlier.
They will all cite the North American economics debate on this issue. For example, there are complicated theoretical models that argue that taxes should not be paid for this, but there are also complicated theoretical models. If you slightly change or introduce a reasonable assumption, the conclusion is completely the opposite.
I don’t think the two economists really understand or care about the assumptions and derivation process of the model. They may have judgments based on their own perceptions that do not involve any interests.
However, for most people, the attitude towards real estate taxes is completely different, probably because it is harder to touch the interests than to touch the soul.
(The author is the chief economist of Yinke Holding Group. This article only represents the author’s views. Email address of the editor in charge: [email protected])