Conditions for introducing property tax in China in terms of replacing land sales revenue – models and verification

Introducing property tax nationwide has been emphasized as an important reform task in China but has been delayed continuously. This paper pays attention the necessity of local governments’ revenue replacement from selling lands to collecting tax. I have built two mathematic models namely, with and without future cash flow, to determine the conditions for the replacement. Through defining and estimating the determinant and reference variables and applying them to the models, I have investigated the two reasons of the delay in introducing property tax in China. First, the land available for collecting property tax is not large enough yet to replace the sales amount of the land. Second, introducing property tax could result in the decrease of local government revenue in the initial stage. In spite of this reasonable delay, it is obvious that the replacement should take place someday because the land for sales is decreasing while the land for collecting property tax is increasing. The models and variables in this study could be applied and referred to for determining the date of the inevitable replacement.