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Why China’s property tax plan is a key pillar in its ‘common prosperity’ drive
- China’s property market has been a driver of wealth over the past two decades, but also a cause of inequality
- As part of its plan to even wealth distribution, Beijing will trial property taxes in certain parts of the country
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Frank Tangin Beijing
China’s plan to introduce property taxes for unspecified regions over the next five years has ignited debate across the country, with some saying it could decimate local government revenue and shift investment preferences, while others hope it will help first homebuyers.
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Property taxes are not new to China, with a levy on commercial buildings introduced in 1986 and limited residential taxes rolled out in Chongqing and Shanghai in 2011. But analysts say Beijing’s “common prosperity” goal, which aims to smooth out wealth distribution across Chinese society, could make things different this time around.
The central government said last week it would tax land and property owners in an effort to boost housing affordability. Legally owned rural homes will be exempted from the pilot programme.
Zhejiang province, designated to become the first “common prosperity” pilot zone, is highly likely to introduce the property tax, along with tech hub Shenzhen – which is home to a housing market bubble – and the southern island province of Hainan.
Property has been the most important wealth allocation mechanism in the past 20 years … and also the biggest source of unfairness
Chinese leaders have been discussing a tax on property – which accounts for most household wealth – since 2003, said Yi Xianrong, a former researcher with the Chinese Academy of Social Sciences.
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