© Reuters. FILE PHOTO: An excavator is seen at a construction site of new residential buildings in Shanghai, China, in this March 21, 2016 file photo. REUTERS/Aly Song//File Photo
BEIJING (Reuters) – China could expand pilot testing of a property tax to Zhejiang province, a former government expert was quoted as saying in an official media outlet on Sunday, the latest sign that the country is moving closer to adopting the long-discussed levy.
China launched a pilot property tax programme in Shanghai and Chongqing in 2011, and experts have in the past suggested that the pilot testing be broadened to include Shenzhen city and Hainan province, according to state media.
President Xi Jinping on Friday called for progress on a property tax that could help reduce wealth inequality as the country strives to achieve his goal of “common prosperity” by mid-century.
“China could consider conducting system innovations to expand the scope of property tax while moving forward with tax legislation as soon as possible,” said Jia Kang, ex-director of the finance ministry-backed Chinese Academy of Fiscal Sciences, according to China Property News, which is managed by the housing ministry.
China has mulled introducing a property tax for over a decade but has faced resistance from stakeholders including local governments, which rely on revenue from land sales and worry it would erode property values or trigger a market sell-off.
However, such a tax could help curb rampant speculation in the housing market, which has come under intense global scrutiny as massive developer China Evergrande Group struggles with a debt and liquidity crisis.
Jia suggested extending the property tax trial to the wealthy eastern province of Zhejiang.
Real estate prices vary greatly within China, with prices many times higher in tier-one cities such as Beijing and Shanghai compared with markets in hinterland cities.
“Generally speaking, third- and fourth-tier cities would not be among the first batch for a property tax trial,” Jia said, adding that any property tax regime should adapt to regional circumstances.
China has been collecting property taxes on certain categories of high-end residences in Shanghai and Chongqing since the pilot programme started in those cities in 2011.
In March, the Chinese government said in its development plan for 2021-2025 that it would push for property tax legislation over the next five years, but there was no mention of such a tax in the country’s 2021 legislative agenda for the second consecutive year.