The Impact Of Local Government Behavior On Real Estate Market Under Tax Sharing System

Due to the imperfections of the current tax-sharing system, the fiscal resources and responsibilities mismatch seriously between the central and local governments and between local governments at different levels, resulting in the situation of "fiscal resources-progressively centralized but responsibilities progressively localized" and the imbalance between financial authority and responsibility for local governments. Under the enormous pressure of financial difficulties, many local governments have to depend on the "land finance", creating the extrabudgetary revenue and, to alleviate the urgent needs of the local. At the same time, due to the imperfections of the local fiscal revenue system is not perfect, and the performance evaluation of officials, the local government limit the land supply by limiting for local policies, creating crunch "illusion" to sell in the form of bidding, auction, jack up prices, and thus continue to push The price of commercial housing.Take Wenzhou as an example. The data analysis of Wenzhou City shows, land acquisition, land transfer, financial and taxation and commodity markets over the past decade, empirical Wenzhou City, the current tax-sharing system, in the implementation of the "land finance", local governments set low prices when acquiring land from farmers and set much higher prices when selling land to companies. As a result of the process of land acquisition, bidding, auction to sell at high prices, land and housing prices continue to push up from profiteering due to local governments’limiting land supply policy.Offering an view of the tax system and the plight of the "land finance", the study suggests for reforms at both central and local levels, and offers a brief introduction of the new model of reform in Wenzhou region, for the parties to the reference.