A decision by the Standing Committee of the National People’s Congress opens the experimental project to introduce a general property tax. Over the next five years in some still unidentified areas of the country. The turning point is of great importance for China. The real estate sector, in serious crisis as shown by the defaults of the large real estate developers, covers a third of China’s GDP and has attracted household savings for decades. President Xi Jinping himself would have supported the measure which, however, risks further cooling down real estate, with cascading effects on the economy.
An important step
An important step towards the adoption of a “property tax” at the national level, commonly called “property tax”, that of the Standing Committee which adopted a decision under which the Council of State will conduct pilot projects of property taxation in selected regions, not yet specified, for at least five years. The move reflects intense ongoing debates within the party.
The first official proposal for a property tax appeared in the 2013 Third Plenum decision: since then, it has been listed in the 12th and 13th National Congress Five-Year Legislative Plans, as well as the Legislator’s Annual Legislative Plans for 2015-2018, but only as a preparatory project.
A first draft was produced in 2018 and circulated among central and local authorities for comment, but no further public progress has been made. After years, the project seemed to have regained vigor. The 14th five-year plan adopted in March promised to “anticipate property tax legislation,” as Secretary General Xi Jinping said in an important speech in August in which he expressed the concept of “common prosperity”, a program aimed at reduce economic inequality. The president also added that legislation and the reform of a property tax must proceed “actively but cautiously”.
Inside all the buildings
The same philosophy shines through in the authorization to the Standing Committee. The upcoming pilot projects are not expected to be just an expansion of the residential property tax pilot projects of the Chongqing and Shanghai metropolises since early 2011. The tax being tested in Chongqing and Shanghai is technically called, ‘construction tax. Is therefore not a property tax. Shanghai mainly taxes second homes, while Chongqing taxes the more expensive ones