Chinese City of Xiamen Paves the Way for Long-Discussed Property Tax Pilot | Investment News

BEIJING (Reuters) – The Chinese city of Xiamen is preparing to launch a pilot real estate tax as part of efforts to hedge against major market swings, in the latest sign that China is getting closer to adopting the tax.

Long-discussed reforms such as property and inheritance taxes to close a wealth gap are set to gain momentum after President Xi Jinping called on China to achieve so-called common prosperity.

In October, parliament’s top decision-making body said it would introduce a pilot property tax in some areas, but which areas would be involved and other details were not disclosed.

The city’s statistics office said measures would be introduced to boost common prosperity.

“We need to prepare for the implementation of a pilot property tax project in Xiamen to hedge against major fluctuations in the city’s real estate market,” he said in a statement posted on his website. .

Xiamen, on the southeast coast of Fujian Province, is the first Chinese city to offer preparatory work for property tax, said Yan Yuejin, research director of E-house China Research and Development Institute. based in Shanghai.

“The property tax system and framework should be explored and implemented at an accelerated pace,” Yan said.

“For … the goal of common prosperity, this task is bound to actively advance.”

The idea of ​​a homeowner levy first surfaced in 2003, but failed to take off due to concerns that it would hurt housing demand and weaken prices, triggering a budget crisis for local governments that depend on land sales to make a living.

Talk of a property tax comes at a sensitive time, with the real estate market facing multiple headwinds in 2022 as house prices plummet and real estate investment slumps.

Xiamen’s real estate market is facing its own challenges, including cautious purchases of land by developers and continued weakness in commercial property sales, the statement said.

This week, Xiamen tightened regulatory oversight of funds managed by developers, requiring them to place all deposits collected from homebuyers in escrow accounts amid fears the funds could be diverted to meet other needs, in a sector in need of capital.

(Reporting by Liangping Gao and Ryan Woo; Editing by Robert Birsel)

Copyright 2022 Thomson Reuters.

Penny D. Jackson