Trial balloon to levy property taxes in 2012

The Ministry of Finance is mulling over a pilot program to impose property taxes across the na-tion in 2012, National Business Daily reported Thursday, quoting an unnamed source. The levy will be slapped on property owners in certain selected cities, the source said, because it is too dif-ficult to launch a pilot program nationwide.

Some cities, including Shanghai, have reportedly filed paperwork for the levy of property taxes, but there has been no confirmation from relevant government departments.

Tax authorities believe property taxes will rein in runaway housing prices and prevent local governments from over reliance on taxes from the real estate industry, according to the newspaper.

Analysts had differing opinions on the benefits of a property tax. The proposed levy won't have a big impact on increased home prices, judging by the effects of similar taxes in other countries, said Lei Hua, a senior analyst with China Index Academy, a Beijing-based real estate research firm.

"There is still a lot of work to do before levying property taxes across the country," Lei said. He said there is still no legal basis for a property tax, and it is complicated to set intricate tax rates and rules, suggesting that a property tax would necessitate a consolidation of existing taxes on real estate and land.

"Residential land in China is only leased for 70 years under current law, but if taxes on land and real estate are lumped together, residents should have property and land rights forever," said Zhong Wei, director of the Finance Research Center of Beijing Normal University, who oppos-es the property tax levy in China.

The property tax expenditure is unknown, and lacks sufficient oversight by taxpayers, Lei said.

If the taxes are not used to cover social welfare spending, such as building low-rent homes, average residents would benefit little from the tax while bearing all the burdens, Zhong said.