The Research About Optimization Of Individual House Property Tax Based On Its Function

Since the tax sharing reform in 1994, there are a lot of small tax categories in local government which is scattered and hard to impose. Especially, with the reform of VAT, local taxes are less and less, along with the revenue for local government on the decrease. In all the local taxes in China, there is not a main tax category, which can make a decisive, stable and long-term impact on local tax revenue. But in foreign countries, they regard house property tax as main tax of local government to collect tax revenue, because property tax not only can create sufficient and stable revenue, but also its tax base is regional and universal. However, China only levies it on business real estates, in result of small tax base, which can’t adjust income distribution as a kind of property tax. Then some changes occur on January 28th,2011 that Shanghai and Chongqing began to levy house property tax on private houses. The reform of private house property tax is directly related to the building of local tax system, changing environment of individuals purchasing houses, and the adjustment of income distribution.At first, this paper makes an introduction about the functions of house property tax in raising financial revenue, adjusting income distribution and controlling house price. Based on Chinese special situation, we should mainly define house property tax as a method to raise financial revenue, on the basis of which to adjust income distribution and house price then. After this part, this paper utilizes these three functions to analyze the effect of the pilot reform. Because the pilot reform only levied on new houses but regardless of the stock houses, these three functions can’t come into effect. Therefore, the next step of reform is to tax on stocking houses.In order to analyze the effects of taxing on stocking houses, this paper calculates the house property tax revenues of Beijing, Shanghai and Chongqing in 2010 assumes that they reformed in 2010 by using 6 levels of tax rates and 3 different tax exemptions. The results indicate that the house property tax reform play a strong role in raising financial revenue, but unable to become main tax in local government. And the effects differ in regions of different economy development due to the high house price and low purchaser rate in real estate market of developed regions. As an conclusion based on the results of calculation, we proposed to set tax rate at 0.8% to 1.2% and tax exemption area per capita at 30 square meters to 40 square meters. And the reform is required to improve the property rights registration system and the property value assessment system. Finally, to take 3 functions into effect, local governments have to put all house property tax revenues into the construction of affordable housing.