Economy

No property taxes for now: Official

By Xin Zhiming (China Daily)
Updated: 2010-05-24 06:57

BEIJING - China will not launch taxes on holdings of more than one residential apartment for at least another three years, a government think tank official has said. Meanwhile, many economists continue to warn that the country's economy could slow down amidst property tightening policies and outside uncertainties.

"Taxes on holding of residential properties is impossible at least for another three years," Huang Hanquan, assistant director of the industrial institute of the National Development and Reform Commission (NDRC), the nation's top economic policymaking agency, was quoted by China Times as saying on Sunday.

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As China's home prices continue to soar amid growing public complaint, the authorities have issued a series of tightening policies, with some experts forecasting that taxing more than one residential property could deal a final blow to the housing sector.

The new tax, which is quite similar to a property tax, will increase the cost of holding more than one apartment and thus prevent speculation, which is considered the major factor for surging home prices.

Huang's comment, if true, would be the latest official confirmation that no further major tightening measures are in the pipeline.

It would mean lifting of the Damocles sword currently hanging over the developers and the real estate stocks in the domestic A-share market. The stock market has suffered several big-margin sell-offs in recent weeks due to concerns of pending taxation measures against the sector.

Chinese laws have such taxes on commercial properties, but changes in the taxation on residential housing would require revision of existing laws, which would first need to get the nod from the central government, Huang said.

Rumors have been flying that the local governments would launch such taxes, which is impossible in the near term, he said.

Analysts said the failure to launch such taxes is because the overall economy faces multiple uncertainties and if further tightening measures are taken, the slow-down of the real estate sector, which accounts for about one-fourth of the country's fixed-asset investment, could dampen investment and drag down the country's economic growth.

"Once the real estate market and the stock market both enter the downward track, they would, in turn, affect economic growth," said Wang Jian, executive secretary-general of China Society of Macroeconomics.

"The downward pressure on the Chinese economy is increasing," said Liu Yuanchun, a senior economist at the school of economics at Renmin University of China.

Control of heavy energy-consuming industries, changing export prospects, and possible yuan appreciation would all have the potential to slow economic growth, he said.

The European debt crisis, meanwhile, would also affect investor confidence in the economy, analysts said, making policymakers more cautious over making any major tightening actions, including those aimed at the real estate sector.