China has cleared a major technical hurdle for rolling out a national property tax for the first time by setting up a nationwide real estate registration system.
(Bloomberg) — China has cleared a major technical hurdle for rolling out a national property tax for the first time by setting up a nationwide real estate registration system.
The unified asset network, established after a decade of work, has more than 1.5 billion records nationwide and will update in real time, the state broadcaster reported Tuesday, citing the Ministry of Natural Resources. The registration system covers land and property, according to the report.
The system has long been considered a stepping stone for a national levy on residential ownership, as China looks to raise revenue while controlling property prices. China has been talking about imposing a nationwide tax for more than a decade but progress has been slow.
“Rolling out a property tax will be easier with the system,” said Yan Yuejin, research director at E-house China Research and Development Institute. “But it’s not the only purpose. The system can also help regulators better control home markets.”
It’s not clear when the new tax would be introduced as it could stifle a nascent recovery in the sector after a wave of defaults by overleveraged developers hammered sales and curbed prices over the last two years.
“The registration system lays an important foundation for a national property tax, but it’s not a good time to do that,” said Chen Wenjing, associate research director at China Index Holdings. “The home market remains a drag to the economy.”
A property tax trial began in Shanghai and Chongqing in 2011. In 2021 parliament authorized the program to be expanded to more cities — although that’s yet to happen, with a slump in the real estate market putting those plans on hold.
Lou Jiwei, a former finance minister, recommends imposing a property tax to help boost revenue, arguing that local governments “don’t really have many other sources of tax income to add” to their current portfolio.
The network is crucial as real estate certifications sometimes can’t be used in different cities and had varying standards between urban and rural areas, Yan said.
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