China's plan for a tax on property takes an unexpected twist thanks to the trade war

By Zheng / | May 16, 2019 12:25 PM SGT
Beijing's plan to unveil a nationwide property tax could become a casualty of the escalating US-China trade war, as efforts to push ahead with draft legislation on the new levy appear to be temporarily on hold.
Rising uncertainty in the international environment means that "conditions are not ready" for rolling out a property tax law, Zhang Yiqun, an official with China Law Society, a policy institute under China's Ministry of Finance, told the Securities Daily in a report on Wednesday.
"An imminent fruition of the law also runs counter to the grand policy direction of cutting the tax burden," Zhang told the financial publication, which is affiliated with the Economic Daily, a newspaper under the State Council, or China's cabinet.
China is reducing levies and other payments this year such as the value-added tax, personal income tax and social security contributions amounting to nearly 2 trillion yuan (US$290 billion), in an effort to cushion the economic fallout of the trade war. China's state broadcaster CCTV said on Monday that Beijing will "fight to the end if the US wants to", in response to Washington's move to impose tariffs on US$200 billion worth of goods imported from China.
China is an outlier in that it does not tax real estate holdings, however the central government has been reassessing its policy approach to the sector, the largest store of wealth for Chinese citizens.
The tax is seen as helping tame house prices, while at the same time creating another source of government revenue.
New housing estate blocks take shape in Foshan on February 11, 2019. Photo: Martin Williams
Real estate directly and indirectly accounts for as much as 30 per cent of China's GDP, and more than half of fiscal revenue for local governments.
During the opening legislative session in Beijing in March, lawmakers signalled willingness to move ahead with the tax legislation, sparking a sharp...