A Chinese think tank suggested Wednesday that China levy property tax on urban homes of more than 40 square meters per person, as more cities are considering piloting property tax programs on the heels of Shanghai and Chongqing.
China should expand its pilot property tax reforms to more cities and levy differentiated property tax on homes, the Chinese Academy of Social Sciences (CASS) said in a report issued Wednesday.
The biggest problems for the Chinese property market are that home prices are unaffordable and there are not enough low-priced, government-subsidized homes, said the report.
The report also advised the central government to make use of homes with limited property rights and non-occupation commercial homes by using tax incentives to encourage their rental to people with low incomes.
The suggested one-size-fits-all tax line is relatively low, Yang Hongxu, research director with the Shanghai-based E-House Real Estate Institute, wrote on his Sina Weibo Wednesday.
"The average residential area per capita for China's urban residents is a bit more than 33 square meters at present, so the cutoff of 40 square meters would include 30 to 40 percent of urban families," Yang said.
By 2011, China's housing area per capita was 32.7 square meters in urban areas.
Yang's view was partly shared by Chen Guoqiang, deputy director of the China Real Estate Society, who believed the tax as suggested by CASS would cover even more people - over half of China's urban population.
"Property tax should target the rich, not ordinary families," Chen told the Global Times Wednesday, noting that the CASS suggestion is easy to carry out, but fails to take many complicated situations into consideration.
"Unlike the pilot property tax in Shanghai, which is only levied on new homes, the CASS proposal counts both existing homes and new homes, but what about people having homes in more than one city and what about people living in houses where they hold no property rights?"
The suggestion is also unreasonable in that 40 square meters in the city center is much different from the same amount of space in remote suburbs, Chen said.
Yang of E-House Real Estate Institute suggested levying tax on homes of more than 60 square meters, as is done in Shanghai, so that 15 percent of urban families, mostly rich people, will pay the property tax.
The Chinese government has repeatedly reiterated its stance on property market control and vowed to keep tightening measures like higher down payment requirements and property tax trials.
Shanghai and Chongqing started pilot property tax reforms in January 2011. Throughout 2011, Shanghai's property tax revenue totaled 2.21 billion yuan and Chongqing earned 100 million yuan from the tax.
The central government is actively studying an expansion of the property tax pilot program and may expand the program to more cities when the time is appropriate, Jiang Weixin, Minister of Housing and Urban-Rural Development, said on November 12.
Agencies contributed to the story.