The Effect Of Transaction Tax Cut On Housing Market

Since the monetization reform of China’s housing market,the real estate industry has developed rapidly and become an important part of the national economy.From a macroeconomic perspective,the real estate industry accounts for a high share of society’s fixed asset investment,local fiscal revenue,and total loans from financial institutions.From a microeconomic perspective,housing wealth occupies an absolutely important position in Chinese household wealth.Therefore,the stable and healthy development of the housing market is not only about the development of the economic system,but also about the stability of society.Throughout the development of the housing market,the government has used a series of regulation measures to maintain overall stability,including financial,fiscal,taxation,etc.Tax policies have been frequently used in various macro-control policies.But existing studies on tax policies have mainly focused on developed countries,with relatively little research on developing countries.Therefore,this paper focuses on tax policies in developing countries and aims to clarify the mechanism of the regulatory role of real estate taxation and analyze the effectiveness of tax policies.This study is a useful addition to the existing literature and provides theoretical and empirical evidence for optimizing real estate tax policies and improving the real estate macro-control system in the future.Following the research idea of "consolidating the research foundation-analyzing the policy background-studying the effect of tax policies-proposing reform proposals",this paper gradually develops the specific discussion.Firstly,by reviewing the market response to transaction tax,the relationship between tax rates and tax compliance,and the development of property tax in China,the paper proposes possible directions for future research.In terms of theoretical foundations,we introduce the basic theories of the housing market,devote to clarifying the mechanism of tax regulation,and illustrate the impact of taxation on tax compliance behavior in housing market,laying the research foundation for the latter part of the paper.Secondly,this paper introduces the institutional background of real estate tax regulation in China.To begin with,we review the formation and development of the tax system in the housing market and analysis the current tax system in the real estate market.Next,we focus on the relationship between government tax regulation and real estate market development and describe the practice and reform of tax regulation policies.Besides,through the analysis of the current development of the housing market,we illustrate the shortcomings of tax policies.Thirdly,based on the preferential tax policies for housing transactions on February 22,2016,this paper employs a difference-in-differences(DID)approach to examine the impact of the preferential transaction tax(deed and business taxes)policies on the housing market.Using a large sample of second-hand housing transaction records and housing declaration administrative data in a certain city,we try to answer the following three questions.First,the effectiveness of tax regulation policies.The most fundamental concern about the preferential tax policies is the impact on housing transaction prices and volumes.We found that after the implementation of the preferential tax policies,the before-tax-price and volume of second-hand housing increased by approximately 2% and 23.9% respectively,effectively boosting housing market transactions.This result also remains highly stable in a series of robustness tests.And the positive impact of the transaction tax preferential on the housing market was more pronounced in the priority tax reduction housing market.Then,after accounting for the transaction multiplier effect of market participants selling for the first time and subsequently buying,the transaction tax preferential has a more pronounced effect on housing market flows.Furthermore,the study of the new housing market,as well as all housing,suggests that the transaction tax preferential has strong external validity.Second,the equity of tax regulation policies.To verifies whether the transaction tax preferential meets the housing needs of different income groups,this paper analyses the differential impact of the different quality housing markets.To begin with,by constructing a general equilibrium theoretical framework for the secondary multilevel housing market,we explore the linkage effects of transaction tax preferential on the different quality of housing.In contrast to the theoretical framework,the empirical study finds that the impact of the transaction tax preferential is stronger for improved housing.One possible explanation for this is that the lower tax rate makes more tax incentives available to higher-priced improved housing,prompting more people to purchase improved housing.Next,the significant rise in the number of ordinary housing transactions suggests that the transaction tax preferential did not attract a large number of higher-income buyers into the market,crowding out lower-income buyers.Then,housing price volatility has not increased significantly,indicating that there are no large numbers of speculators entering the housing market to destabilize it.Finally,we use the nationally representative household finance survey data to describe statistics on the housing market and residents’ home purchase purposes before and after the policy.The results verify the extrapolation of the effect of tax transaction tax preferential.Thirdly,from the tax administration perspective,this paper examines the impact of transaction tax preferential on tax compliance in the housing market.The real effectiveness of tax control policies depends on effective collection and management,otherwise all policies will remain on the surface and cannot be implemented.The results find that the transaction tax preferential promotes more accurate reporting of the declared price by taxpayers and significantly improves tax compliance behavior.And this promotion effect is more pronounced in the case of priority tax-reduced housing.At the same time,the tax preferential significantly increased tax compliance in the more active housing market,demonstrating the mechanism by which the tax preferential increases the efficiency of tax administration by increasing access to tax-related information by the tax authorities.In addition,transaction tax preferential increase vertical inequality in tax compliance and increase housing wealth differentiation.Finally,transaction tax preferential promote increased government revenues and provide new options to boost housing market development,and promote reform of the fiscal system.Finally,to ensure the stable development of the real estate market,the government should increase its attention to the optimization of tax policies and carry out a comprehensive renovation of the existing macro-regulatory system.On the one hand,against the background that the levy of property tax is an inevitable requirement for China to promote the reform of its fiscal and taxation system,this paper explores the institutional design of an acceptable property tax.On the other hand,to build a long-term macro-regulatory system for real estate taxation,this paper puts forward suggestions for restructuring the tax regulation system,rationalizing market demand,and improving the macro-regulatory system.The innovation of this paper is mainly reflected in the research perspective and research methodology.From the research perspective,firstly,the existing literature on real estate taxation policies mainly focuses on developed countries,while this paper provides relevant evidence from developing countries.Secondly,this paper carefully portrays the transaction chain in the housing market.By analyzing the multiplier effect of housing market transactions,we affirm the role of tax policy in facilitating the flow of the housing market.Thirdly,while the existing literature focuses more on the impact on the housing market as a whole,this paper explores in detail the different quality housing markets and analyses whether the housing needs of different income groups are met.Fourthly,the relationship between tax rates and tax compliance is a fundamental issue,yet both theoretical and empirical results are inconclusive.While domestic studies have focused more on corporate taxes,which account for a higher proportion of tax payments,this study provides new evidence from the perspective of natural persons.From the research methodology,firstly,this paper combines housing microtransaction data,declaration administrative data,and survey data to construct a unique dataset that provides good data support for subsequent empirical research.Then,by constructing a general equilibrium theoretical framework for the secondary multi-level housing market,we analyze in depth the impact of transaction tax preferential on different quality housing heterogeneity and then combine the microdata for quantitative analysis and validation.