This paper examines the urban housing sector of China and proposes a property tax reform. Over the past decade, housing price in urban China has been increasing dramatically because of strong demand for self-use, investment and speculation. The booming housing market, however, has brought several challenges for further development, such as housing affordability, inequality, and possible housing bubble. One strategy is to reform the current property tax system. Specifically, this paper proposes that China significantly reduces taxes in circulation but levies property tax during possession. Doing so will increase housing affordability because of lower transaction costs, reduce speculation because of higher cost of holding, stabilize fiscal system because of more sustainable tax revenues, and improve the efficiency and fairness of the property tax system because of the implementation of “ability-to-pay” and “who use who pay” principles.
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Paper provided by University of Nevada, Reno, Department of Economics & University of Nevada, Reno , Department of Resource Economics in its series Working Papers with number
07-008.
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