context: While hailed as a long-term solution to the housing problem, property tax has only been trialed in selected cities since 2011 with marginal results achieved. Bound to cross powerful interests, the wider adoption of property tax has met vocal resistance among official circles and beyond. Economic wounds of the pandemic slowed the process in 2020, but the following recovery offers tax advocates a window of opportunity. As ‘common prosperity’ is fasttracked as a major policy, property tax is rising on the policy agenda with the hope that it might tame house prices and redistribute wealth.

On 23 Oct 2021, National People’s Congress authorised State Council to carry out the reform pilot work on property tax in selected localities, marking the move from years of theoretical debate to implementation. The decision specified

  • property tax will be levied on both residential and non-residential use properties
    • this excludes legally owned rural homesteads with residences
  • specific measures for the pilot real estate tax will be formulated by State Council
    • local governments of the pilot regions will formulate implementation rules
  • selection of pilot areas shall be determined by
    • enhanced pilots and unified legislation
    • stable and healthy development of the real estate market
  • pilot period is five years from the date of issuance of State Council’s pilot measures

Moving on, Ministry of Finance and State Administration of Taxation will draft relevant measures and make preparations for the pilots in accordance with the procedures.

Core cities plagued by housing affordability problems will likely to be piloting first, notes Chen Wenjing 陈文静 China Index Academy deputy research director.

Property tax could curb the expectation of ever-rising housing prices and help promote the healthy development of the real estate market, argues Luo Zhiheng 罗志恒 Yuekai Securities Research Institute chief macro analyst.