Many expect the introduction of a property tax to rein in runaway housing prices, yet economist Ba Shusong wrote in his blog that a property tax will have limited impact over house prices.
It’s an irreversible trend to introduce property tax sooner or later, the scholar believes. But the main purpose of such a tax is to rationalize the existing property-related tax structure and provide a stable source of income for local governments, according to Ba. Property tax can secure the income of local governments and thus improve the quality of public services, he said, as revenues for selling land for development, their major source of income, keeps dropping.
The introduction of a property tax will mean a process of redesigning existing tax and fee charges surrounding real estate and land, the scholar said. Many of the existing taxes need to be merged to form a more comprehensive tax structure, he said.
Ba suggested the tax categories, after their trial run in a small number of cities including Shanghai and Chongqing, will likely be broadened in scope soon to formulate a more representative framework for the full introduction of the tax in the future.
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