Real estate tax may become the main source of income for city and county governments

Focus on the real estate tax reform pilot (3)

Reporter Wang Xiaoxia

The topic of real estate tax has recently attracted widespread attention and heated discussion in the society. "The biggest significance of this real estate tax pilot is to provide a long-term and stable source of funds for urban infrastructure construction in the process of China's new urbanization development." Experts interviewed by the China Economic Times said that real estate taxes may become the main source of income for future city and county governments.

In the future, real estate tax may become the main source of income for city and county governments

According to the analysis of many industry insiders, the main reason why the real estate tax is put on the agenda is to regulate the real estate market, replace the land finance and adjust the distribution of personal income.

Wen Laicheng, professor of the School of Finance and Taxation of the Central University of Finance and Economics and executive director of the Institute of Local Finance Investment and Financing of Zhongcai-CSI Pengyuan, said in an interview with this reporter that real estate tax is difficult to replace land finance to a certain extent, but it will change the status quo of local governments relying too much on land finance in the past.

"In the past few years, when we investigated, we found that the fiscal revenue of land in some places accounts for 60% of the total fiscal revenue. However, land resources are limited, and some first- and second-tier cities have begun to suffer from the embarrassment of land resource depletion, which highlights the importance of real estate taxes. Wen Laicheng said that therefore, the pilot real estate tax reform will change the current situation of local governments in China relying too much on land finance and reduce local fiscal risks.

Hu Jinghui, chief economist of Jinghui Think Tank, pointed out in an interview with this reporter that on the one hand, due to the influence of the regulation and control of the property market in recent years, the income from land transfer fees has continued to decrease; on the other hand, in the medium and long term, there are fewer and fewer state-owned construction land that can be transferred, and the income from land transfer funds will be a major trend. "It is imperative to pilot, legislate and officially introduce a real estate tax as soon as possible to replace the depleting land transfer fee."

Wen Laicheng said that in the long run, the real estate tax has little impact on house prices, or is not a decisive factor, because its main function is not to regulate house prices, but to raise fiscal revenue, as the main tax of local governments, becoming the main source of income for city and county governments.

Feng Guoliang, founder of Renju Think Tank, also told this reporter that from the perspective of fiscal revenue, in the future, local fiscal revenue will gradually transition from land finance to real estate tax, and real estate-related taxes and fees will shift from incremental taxation to stock taxation.

Chen Sheng, president of the China Real Estate Data Research Institute, also said in an interview with this reporter that real estate taxes will become an important source of increasing local taxes. However, whether it can replace land finance and become the main source of local fiscal revenue is related to the scope of collection and tax rate in the future.

Real estate taxes provide a long-term source of funding for urban infrastructure

"The biggest significance of the real estate tax pilot is to provide a long-term and stable source of funds for urban infrastructure construction in the process of China's new urbanization development." Wen Laicheng said that at present, China's urbanization rate has reached more than 60%, and this proportion will increase in the future. From the perspective of development, the maintenance and construction of the city will be an important task, which requires stable funds, but the current existing urban maintenance and construction tax in China is only an additional tax, the amount is relatively small, and it is difficult to meet the needs of rapid urban maintenance and construction. Property taxes can compensate for this deficiency. "From the perspective of some countries that have already levied real estate taxes, real estate taxes mainly play a role in urban maintenance and construction." Wen Laicheng said.

Shi Zhengwen, vice president of the Finance and Taxation Law Research Association of the China Law Society and director of the Finance and Taxation Law Research Center of China University of Political Science and Law, said that as a source of income for grass-roots governments at the county and municipal levels, real estate taxes can directly play a role in providing basic public services for local residents, improving public security, education, infrastructure construction, and improving people's well-being.

"As a local tax, the better the regional economic development, the real estate tax is relatively high, and then use the tax to further feed the city construction and development." Chen Sheng said.

At the same time, from the perspective of the fiscal and taxation system, real estate tax reform is the need to improve the modern tax system. As a direct tax and a local tax, the real estate tax is in line with the reform direction of "appropriately increasing the proportion of direct tax" and "improving the local tax system" in the 14th Five-Year Plan, which is conducive to straightening out the fiscal and taxation relationship.

"It can be said that in the short term, the market will have some fluctuations in this real estate tax pilot; but in the long run, the purpose of the reform is to link the reform of the fiscal system with the reform of the housing system and promote the stable development of the real estate market, so as to promote the stable and healthy development of the property market." Wen Laicheng said.