Chinese officials propose a property tax to fight potential bubble

Rob Schmitz Jan 10, 2011
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Chinese officials propose a property tax to fight potential bubble

Rob Schmitz Jan 10, 2011
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STEVE CHIOTAKIS: Here in the U.S., the debate about economic growth usually centers on cutting taxes. But over in China, there’s a move to raise taxes. Because economic growth, officials say, is a little too hot. One of China’s biggest cities will be the country’s first to collect residential property taxes.

Marketplace’s China Bureau Chief Rob Schmitz has more.


ROB SCHMITZ: Yep, you heard right. Chinese homeowners don’t have to pay annual property taxes. And it’s been great for the real estate business. A little too great.

PATRICK CHOVANEC: You hear stories of people buying two, three, maybe even 20 apartments that are empty.

Patrick Chovanec teaches business at Tsinghua University in Beijing. He says that in the U.S., you might think twice about buying, say, a dozen high-rise condos. Property taxes might be rough. Not so in China. And that’s produced a buying frenzy that’s pushed prices through the pointy high-rise roofs in China’s big cities, making the government worry there’s a bubble.

In March, the city of Chongqing will start taxing high-end residential property. Shanghai’s rumored to follow suit later this year. Chovanec says the taxes may be more effective in becoming an alternative source of revenue for local governments, which have never had the right to collect them. But local officials in Chongqing shouldn’t hold their breath. Unconfirmed reports say the new tax rate there will be around one percent.

In Shanghai, I’m Rob Schmitz, for Marketplace.

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