Chinese property taxes arrive

Here's the Wall Street Journal: China City Set to Tax Residential Real Estate
Here's South China Morning Post: Chongqing to impose controversial flat tax

The Western media is overly focused on the property market and missing the real story. China is in the midst of economic reform aimed at building a strong domestic economy and a major problem facing the country is government revenues. Most localities generate a significant portion of revenues from land sales; this caused the local governments to become overly reliant on property development for revenues. This is a contributing factor to the property bubble in major cities, but the real goal of tax reform is to find a stable source of revenue for local governments—one that can survive a bursting of the property bubble. I doubt the tax will have any short-term impact because the tax will be less than the annual increases in property prices. The bubble will end when the bubble ends and this policy will not be the trigger.

Besides Chongqing, Shanghai has been approved for a trial property tax.

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