Property tax may take effect in 2008

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China is expected to levy a property tax in 10 regions on a trial basis next year; the China Securities Journal reported yesterday quoting what it said was a well-informed source.

The State Administration of Taxation picked 10 provinces and cities, including Beijing, Shenzhen, Dalian, Jiangsu and Chongqing who may start paying taxes on property starting in 2008.

An official with the State Administration of Taxation said on Friday that it is preparing for the introduction of the tax; however, research is needed before enacting the new policy because large gaps exist between regional economies and the management of properties is complicated.

This is yet another means for the central government to rein in property speculation and stabilize the property market. China has imposed a variety of property taxes on developers, such as a land value-added tax, land-use tax and land-transfer fees. Developers pass on these costs when they sell properties.

The proposed property tax is expected to convert this tax levy into annualized tax, which will ideally slash housing prices which have jumped an average of 8.2 percent in August from a year earlier in 70 major cities in China.