Research On China’s Real Estate Taxation System Reform

It has been initiated for several times in documents at central level since2003to reform the present real estate taxation system and implement the unified and standard real estate tax. However, the process was advanced quite slowly and the disagreements and disputes on this issue arouse in the society, which brought about fluctuation of the real estate market and capital market and negative impacts on the smooth development of the economy to some extent.The unified and standard real estate taxation refers to the tax paid on tenure of real estates such as lands and houses. It is a property tax in nature. The real estate tax has become a popular tax in western market economies because of its advantages compared to other taxes and its important role in local government finance. Besides, most transition economies and developing countries are making an effort to adopt it. It is highly realistic and necessary to carry out the real estate taxation system reform in China both from the perspectives of economic and social transformation, deepening the socialist market economy and completing the taxation system itself.It is analyzed in this paper that the public ownership on land could not be the systemic barrier on reforming China’s real estate taxation system. The establishment of socialist market economic system has determined the commodity nature of land and land-use right. The enactment of the Property Law has further defined its property nature. The land-use right and housing ownership has become the actual components of the private property rights. It has been clearly proclaimed in Chinese laws that the land-use right could be separated from the land ownership; the land-use right could be transferred, rented and mortgaged; the subject of the land-use right could partly occupy the land usufruct and exclusive right. The land-use right which is transferred with compensation can be treated as the private property of the tenants during the specified leasing period. Taxing on pubic land of China is out of systemic barriers.It is proposed in this paper that pushing forward China’s real estate taxation system reform with promoting the local governance development as its primary objective could be more helpful for the process of China’s economic transformation. The real estate taxation system reform could absolutely open an important window for the development of Chinese local governance because of its important roles on changing the present situation of local government operating with the main focus on economic development, setting up a fund-raising mechanism with unified norms for local government, providing positive incentives on establishing public-service-oriented government, improving fiscal efficiency of the local government, promoting the effectiveness and responsiveness as well as the equilibrium development of the subject structure of local governance through weakening up the right consciousness of the taxpayers.It is emphasized in the paper that the route on China’s real estate taxation system reform should be in accordance with the demands of socialist market economy. The principle of "wide tax base" should be adopted so that the residential real estates must be strictly taxed. The tax base should be calculated based on the assessed market value of the real estates. The property tax should be strictly collected as the local tax in order to stimulate and protect the initiatives of the local government. Furthermore, the related institutions should be well-completed in consideration of the systematicness and complexity of the real estate taxation system reform.It is proposed in this paper that the current land-leasing system should be coordinately reformed with the real estate taxation system reform. They are closely interrelated in practice although they are different concepts belonging to different economic scopes on theory. It is necessary to change the current land-leasing system along with the real estate taxation system reform. The land annual rent system could both reflect the land leasing relationship between the tenants and the state and effectively resolve the problems derived from the present "Land Finance". The adoption of land annual rent system could be beneficial for the smooth implementation of the real estate taxation system reform.