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Property Tax May Go into Effect Next Year

China is expected to levy a property tax in 10 regions on a trial basis next year, the China Securities Journal reported today quoting what it said was a well-informed source.

The State Administration of Taxation has picked 10 provinces and cities, including Beijing, Shenzhen, Dalian, Jiangsu and Chongqing, to levy "virtual property taxes" this year, which means no money will actually be collected. Starting next year, property owners in 10 cities may have to start paying the tax for real.

An official with the State Administration of Taxation said on Friday that it is preparing for the introduction of the tax. He said research is needed before enacting the new policy because large gaps exist between regional economies and the management of properties is complicated.

"Property tax is an inner stabilizer of real estate market," said Fan Gang, director of the National Economic Research Institute China Reform Foundation.

"The tax can reduce (the number of) idle properties and will be a stable income resource for the government," Fan said.

China has imposed a variety of property taxes on developers, such as a land value-added tax, land-use tax and land-transfer fees. Developers pass on these costs when they sell properties.

The proposed property tax is expected to convert this tax levy into annualized tax, which will ideally slash housing prices.

Housing prices in 70 major cities in China jumped an average of 8.2 percent in August from a year earlier.

(Shanghai Daily October 16, 2007)

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