China signals possible introduction of national property tax

Beijing

CHINESE policymakers signalled they may revive efforts to introduce a national property tax, as surging home prices raise concerns over a widening wealth gap.

A trial of real estate tax reform was discussed at a seminar held Tuesday by officials from China's Ministry of Finance, top legislature, housing ministry and taxation administration, said a statement on the finance ministry's website. The participants listened to opinions on the trial from local officials and some scholars.

The wording marks the first time Chinese policymakers mentioned a real estate tax trial, after years of pushing toward formal legislation on the levy, said Yan Yuejin, an analyst at E-House China Enterprise Holdings' research institute.

The move comes as authorities tackle a jump in residential property prices and President Xi Jinping vows to address wealth disparities in the world's second-largest economy.

Real estate was the biggest driver of gains in household assets last quarter, overshadowing areas including financial investment, showed research by Chengdu's Southwestern University of Finance and Economics.

"Official news on the seminar is a strong signal sent by the Ministry of Finance," said Shi Zhengwen, a professor at China University of Political Science and Law in Beijing.

"China may roll out a trial in some cities first, before finalising legislation on the tax. Starting a trial this year is very likely."

President Xi said last month that China must not allow the gap between the rich and poor to widen further, in a speech published on the website of Qiushi Journal under the Chinese Communist Party's Central Committee.

Residents "becoming well-off together", a concept more frequently mentioned by Mr Xi in the past year, is a "major political issue" instead of an economic one, he stressed in the speech.

A renewed fear of missing out on property gains has spread across China's biggest cities since last year as people seek to protect their wealth against inflation following the pandemic.

Despite more meticulous curbs deployed by local authorities, home prices grew at the fastest pace in seven months in March.

A national tax on home ownership has long been seen as a key way to cool speculation, while also running the risk of depressing market sentiment. China voiced the idea for the first time in 2013, before work on drafting the law began, but little progress has been made since.

In 2018, Premier Li Keqiang said the government will press ahead with the tax, yet in 2019, officials were still refining the draft.

In March, the government again pledged to push forward with the legislation as part of its new five-year plan covering 2021 to 2025. BLOOMBERG