Research On The Reform Of China’s Deed Tax System

Deed tax, an important part of real estate taxation system, is a kind of tax which exists in the real estate transaction. It can not only help raising revenue for the local government but also bear the responsibility of macro-control of real estate market.Land-use right transaction and real estate transaction are mainly the parts levied, while the former is the beginning of the operation of real estate market and the latter is the finishing, which are jointly the key parts controlled by real estate taxation system. Theoretically, governmental functions of revenue raising and wealth distribution adjustment in public economics, external effect in real estate economics and non-neutral taxation, tax incidence and shifting in taxation economics, are commonly composing foundations of deed tax. From the history of deed tax, it emerges in the Eastern Tsin Dynasty, develops in the Song Dynasty and perfects in the Tsing Dynasty. After the founding of the People’s Republic, the central government continues levying the deed tax and publishes the provisional regulation concerning deed tax in1950. With the developing of reform and opening-up, in1997, the state council revises and re-publishes the provisional regulation of the People’s Republic of China on deed tax, which composes the main content of the current system of deed tax.In1994, the reform of system of tax distribution laid the foundation of the basic pattern of revenue distribution between central government and local government. The deed tax is an important part of local tax system and a constant revenue resource for local government. With the acceleration of urbanization, a great progress has been made in the market of real estate and the revenue of deed tax increases fast. In2010, the revenue of deed tax is246.5billion, accounting for6.1%of total local revenue. Recently, new situations appear in the real estate market, such as rising of real estate price, high housing vacancy rate and serious speculation. For the healthy development of real estate market, a series of macro-control policies come into being to restrain the demand of speculation, encourage residents buy their homes for the first time and ensure the medium and low-income residents have their own houses to live. It contains strict land examination and approval, restriction of purchase, restriction of loan and adjustment in the real estate tax. Among these policies, the real estate tax gets more attentions. Experts, whether in academic fields or in practical fields, ask taxation in the transaction and tenure of real estate to play an important role, to suppress excessive high housing price and keep the real estate market developing stably. With regard to this, the central government adjusts the rate of taxes such as deed tax and business tax several times, implements differential taxation policies and launches experiments of tax reform in tenure of real estate in Shanghai and Chongqing. All the government has done get active effect.From the practices of other countries, we can get the real estate tax levied in tenure is really an effective way of macro-control, but it does not mean the tax levied in transaction is not working. The documents lately show the study of real estate tax is very hot and nearly all studies are around the tax in the tenure of real estate because they assume tax in the part of transaction may shift, only raise housing price and can neither be used for macro-control.Through comparing the pattern of tax distribution in the real estate market and assessment of macro-control effect of tax, this dissertation reveals that78%of tax revenue from the real estate market is mainly levied in transaction, so the tax in transaction should undertake the responsibility of macro-control and the best choice in the tax in transaction is deed tax. Characteristics including differential tax rates, the method of "impose firstly and prove latterly", the grantee as the tax payer and so on, make the deed tax have a role in the macro-control of real estate market. These years, the government has already accumulated knowledge of experience and got some effect.Currently, the socialist market economy has already stepped into the stage of melioration and the reform of economic system has already stepped into the deep water. According to what premier Li has proposed, the government functions should be straightened, market economy should play the fundamental role, the dividends of reform should be further released. So, we should reconsider the deed tax, put it in the background of promoting urbanization, in the framework of macro-control, in the scheme of reform of fiscal systems to thoroughly analyze the problems faced, get the focus of macro-control of real estate market, reasonably design the content of deed tax and fully take the advantage of the function of macro-control and developing economy.Nowadays, the main drawbacks of deed tax is that the set of differential tax rates is too simple, it is hard to reach "point-to-point" control, it is restrained by the upper limit of statutory rate and so on.To further meliorate the design of deed tax, it is necessary to take the definite thought, principle, objective, mission, route of reform and especially make sure the direction of reform from the macroscopic view. Meanwhile, it is essential to amend the differential rates of deed tax, solve the contradiction of duplicate taxation, establish the central status of deed tax in the system of real estate taxation, improve the supporting measures of reform, design the proposal of deed tax from microscopic view, bring the role of deed tax into full play. Then, the reform would enable deed tax not only raise revenue for local government, but also shoulder the function of control of transaction of real estate to contribute to the healthy development of real estate market of our country.About the specific plan of reform of deed tax, this dissertation propose to set differential taxes on the basis of the purpose of buying land, the practical situation of house purchaser and the regional difference. The set of taxes according to the practical situation of house purchaser which means the purpose of buying house is the most direct and effective method of control. Applying the maximum tariff to the speculators who buy houses as investment or speculation raises their costs and reduces the profit, which helps restrain this kind of house transaction. However, applying the minimum tax rate or even no tax to the residents who buy house for the first time help them reduce the cost and fulfill their demand of having houses, which also meets government’s object of improving people’s livelihood. Applying middle or high deed tax rate to purchase of top-quality housing, on one side, shows the foundational function of market, and, on the other side, raise money for the building of security houses, reducing the gap of income distribution.The reform of deed tax is the important content of reform of real estate taxation as well as an organic part of deepening construction of tax system. The writing of this dissertation starts from the thinking of development of real estate market and then turns to the study of reform of deed tax and tries to get some breakthrough whether in theoretical field or practical field. The innovations are as follows:1. Arrange the history and evolution of deed tax in China from the start of levying in Eastern Tsin dynasty to the recent published policies, then, compare the system of deed tax between the ancient time and modern times, between home and abroad and among the recent policies, at last, make a comprehensive conclusion. All of these never appear in other documents.2. Prove the deed tax is a proper instrument for macro-control in transaction of real estate. Because the current deed tax system is not suitable for the macro-control now, this dissertation redesigns the system of deed tax and proposes supporting measures which belongs to the system innovations and gives reference to the government.3. There are no specialized documents about deed tax right now, this dissertation systematically makes deed tax as the only object of study, deepens the theoretical and practical study about it and put forward the reconstruction thought of system. In a sense, the study itself is an innovation.Taking deed tax as the object of study is affirmation of the effect what the deed tax has exerted in the macro-control of real estate market, and more, is the belief and expectation of the more important role played by it. Without a doubt, the macro-control in tenure should focus on the real estate tax, but it does not have enough conditions to implement in China right now even though it is already a common sense. Therefore, the responsibility of macro-control of real estate market stays in taxation of transaction. Deed tax, an old tax, has internal advantages and accumulates rich practical experiments. So, it is better to deepen the reform of deed tax than reset a new kind of tax. And it is comparatively easy for the reform of deed tax if the government can make sure the focus of reform and adjust the differential tax rates accordingly. It is sure that the reform of deed tax will further improve and strengthen the macro-control, constantly promote the development of real estate market and economy and push forward the reform of system of economy.