China will start to collect a land tax, which has been suspended
for over a decade, from real estate developers in the central
government's latest effort to cool the country's property
market.
The State Administration of Taxation said on its website on
Tuesday that it would begin to formally levy the value-added tax on
land - 30 to 60 percent of developers' net gain from a property
deal - from February 1.
The value-added tax on land was written into a national
regulation in 1993, but was not widely collected due to a
subsequent recession in the real estate sector.
With China's real estate investment surging and house prices
rocketing, the tax was resumed for the first time in Shenzhen at
the end of last year.
At present, some regions in China are collecting the tax at a
rate of 1 to 2 percent of advance sales of newly developed houses,
while other areas have yet to start collection.
The new policy shows that the government clearly requires the
levying of the tax and will continue its macro-control over the
real estate sector this year, analysts say.
The administration said the tax will be collected as soon as a
single development project is finished or transferred.
"With the reintroduction of the value-added tax on land, the
property sector will rank among the industries with the heaviest
tax burdens in China, and falling profits will dampen future
investment in the sector, the Oriental Morning Post quoted
an unidentified developer in Shanghai as saying.
"Some developers may suffer great pressure once the tax is
formally collected," Xiao Li, secretary of board of the
Shenzhen-based developer China Vanke Co., Ltd., told the
Shanghai-based newspaper.
"Vanke had set aside 300 million yuan (US$37.5 million) by 2006
in preparation for the reintroduction of the tax, " said Xiao.
In 2006, the price of newly-built commercial houses in many
Chinese cities saw a year-on-year hike of more than 10 percent,
despite government policies aimed at stabilizing housing
prices.
The investment in China's real estate sector surged 24 percent
year-on-year in the first 11 months of 2006, three percent higher
than that of the first quarter.
(Xinhua News Agency January 18, 2007)
