Effect of property tax to be seen
(China Daily)Updated: 2007-01-19 10:18
Jiangnan Metropolis News: The new notice about collecting the land appreciation tax will not only make the land system open, transparent and well regulated. It will also end the era in which the real estate developers could make unreasonably high profits.
Since SAT released the notice, the value of the country's property developers has plunged on the stock markets in Shanghai and Shenzhen. The average decrease of all property developers' stocks was 9.78 percent on Wednesday.
The central government has launched several measures to control the real estate market since last year, showing its determination to break the bubbles in the property sector. This move is the latest attempt.
According to current rules and regulations, local tax authorities can decide the tax rates based on local situations. The rates in Nanjing, Jiangsu Province and Shanghai are both 1 percent. The low rate is an insignificant part of the property profits.
By setting out the exact framework for collecting the land appreciation tax, the SAT could change the tax into a strong tool against the under-the-table deals of property developers, including faking financial reports and hoarding land. Hence, the real estate sector may return to its normal level of profit.
Under the latest SAT notice, the tax authorities have more practicable guidelines for collecting the taxes and real estate developers are no longer able to avoid paying taxes under various covers.
The real estate sector has long been considered the most lucrative business in the country and the sector's tycoons find their names in the list of China's richest. But their wealth was accumulated under rudimentary policies and laws.
The latest tax move will cut away a big part of the real estate profits and will surely help improve the country's land system.
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