State Council Researcher Says Tax Reform Could Curb Chinese Property Speculation

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A special researcher with China’s senior-most government body says that real estate tax reforms are the best means of curing the speculative bent of the Chinese property sector.

Zuo Xiaolei (左晓蕾), a specially appointed researcher with China’s State Council, writes in Shanghai Security Journal that government real estate policy must shift from the goal of expediting short-term price reductions to the final goal of ensuring that houses are mainly used by owners for occupation, as opposed to speculative purposes.

According to Zuo China’s real estate market is currently characterised by speculative activity and malfunctioning market mechanisms. She advocates government intervention with a view to correcting market mechanisms and preventing them from becoming “warped.”

Chief amongst the measures that she advocates for correcting the property market are reforms of the real estate tax system to curb speculative behaviour, and the expansion of pilot trials of taxation reforms.

“There is a direct relationship between the stable housing market prices of many developed countries, or their ability to ensure that owners purchase home to occupy, them and the use of an effective real estate taxation system that puts a cost check on speculation,” writes Zuo.

“Following ongoing short-term adjustment policies to stabilise market prices, it would be reasonable to follow up with long-term mechanisms as quickly as possible, so that a real estate market focused on owner-occupiers can maintain long-term and stable development. ”

Zuo criticised ongoing failure to reform the real estate taxation system, which she says it the likely cause for many of the property market’s current failings, and called for the expansion of trial tax reform as soon as possible.

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