2014-07-20

Local Govts Fear Developers Will Go Bust Before Paying Taxes

In addition to slowing land sale revenue, governments are watching their real estate transaction tax revenue sales growth tumble. Real estate business tax and deed taxes increased 6.6% and 11.7% in the first half of 2014, falling 39.1% and 28.1% from the first half of 2013. It is normal for growth to be in the 20-30% range. (Additionally, the growth was front loaded in the early months this year.)

Some local governments have formed special task groups to collect real estate taxes. One official in a large city in Guangdong said they are worried that small and medium developers will go bankrupt before paying their taxes.

There's some concern that the push to collect taxes could be the straw that breaks the camel's back: Chinese authorities chase RMB4tn in pending land value tax
China's tax bureaus are gearing up to crack down on real estate firms and individuals who owe land value incremental tax, with their total tax arrears touching 4 trillion yuan (US$650 billion).

This might become the last straw for housing companies in China that have already been struggling with their capital chains.

The Guangdong Provincial Local Taxation Bureau has implemented a schedule to chase pending arrears of land value incremental tax among housing firms in the province, while Xiamen has also drafted and amended a plan, which will become effective in September, according to Shanghai's National Business Daily.

China has failed to effectively levy the land value tax.

多地加紧清缴房地产税费:担忧中小房企倒闭
Property "frozen" led to a substantial decline in tax revenue, some local governments have initiated action to settle taxes housing prices.

According to the revenue and expenditure of the Ministry of Finance has announced the first half of this year, the real estate business tax, deed tax, an increase of 6.6%, 11.7%, respectively, compared to the same period last year, the growth rate fell 39.1 percent, respectively, 28.1%, and frequently in the past twenty or thirty percent The high level of growth compared to the formation of a huge gap.

"Such a gap in the local show will double amplification." Guangdong Provincial Finance Bureau an analysis of local government revenue does not get rid of the shackles of the high proportion of real estate taxes.

"China Times" reporter learned that, in response to this gap, many tax authorities set up a special project team for the land and real estate, and intensify collection and land, real estate-related taxes and fees.

"We are worried that once the closure of small and medium housing prices, taxes on the income does not come up." A prefecture-level city in Guangdong tax inspectors responsible Quan (a pseudonym) told reporters.

Small room rate was included in the list of priorities

First half of July, a prefecture-level city in Guangdong above the tax inspection authorities issued hundreds of collections of information. "The main catch with land, real estate taxes, the object of the call, including businesses and individuals." Quan said.

Quan also said that more than two months before their units in the special team has been set up specifically for the land, real estate taxes in the call, the company responsible for the re-examination of real estate, taxes and projects involving land use objects such as units and individuals payment of accounts and collections.

Reporters learned in the interview process, Guangxi, Jiangsu and other provinces in the local tax department has also set up collection group for real estate, land.

In fact, since the beginning of last year and more trouble slowing revenue growth, many cities choose recovered taxes and other ways to fill the revenue gap. Throughout the year, revenue is still not optimistic about the situation, the recovery of the real estate industry is the focus of the goal, but rather to make the tax department worried about that, because the first half of this year, the real estate industry downturn, many small room rate debt, capital chain tension.

"The financial difficulties of small and medium housing prices are included in the key list of recovered tax audit." A prefecture-level city in Jiangsu Province, a tax inspector who said the city's housing prices over the past two years, small and medium owed more taxes, some companies Only by relying on usury can barely sustain. "Once insolvent companies go bankrupt, developers running, there is no way to recover the taxes up." He said.

This year, Ningbo, Zhejiang, Jiangsu, Nanjing and Wuxi, Hefei, Anhui, Hubei Xiangyang, Shenmu, Shaanxi and other places, there are many small and medium housing prices due to funding strand breaks, into bankruptcy, its projects have mostly failed to materialize, the person in charge of housing prices run Road phenomenon increased significantly, and even the national top 100 real estate enterprises glorious estate broke a more serious crisis in the capital chain, the company accounted for financing private lending total size of 1/3, the amount of more than 1 billion yuan, and stuck the roll continued by a vicious cycle.

"Some taxes precipitation for many years, look at what can be dug out this year the call, the call as soon as possible." Prefecture-level city in Jiangsu Province, a tax inspector who said, "real economic situation is not good, taxes do not go up, so to catch a grab land, real estate taxes, the tax amounts in these areas large, easy to bear fruit. "

Many tax department who told reporters that the taxes levied on the real estate industry there is a large flexible space, there is "ample time finance, payment may be paid when the financial pressure, housing prices must contribute to the tax authorities to support the completion of performance appraisal" of the situation .

"Poor operating conditions of the enterprise, pay taxes in the first half; operating conditions can also be a year of enterprises to pay taxes;. Ability of enterprises can pay taxes a year and a half," Quan admitted to the recovery of the real estate business different standard, because the tax index greater pressure this year, has been banned "overdone tax" also appeared frequently.

In the Transaction sluggish housing prices slowed down payment, the occasion, the tax authorities to step up the recovery of small room rate taxes, making the already tense capital chain small room rate "worse" to increase the funding strand breaks crisis.

Tap the potential of small taxes

Housing prices in the local tax department initiated action to settle taxes, and local governments suffering from "real estate dependency syndrome" are closely related. However, with the land market transactions and real estate transactions cooling trend, transactions dropped significantly influenced by the increase in taxes.

According to the Ministry of Finance revenue and expenditure showed the "deed" significantly increase downstream, completed 217.418 billion yuan in the first half, up 28.1 percent year on year growth rate down.

"Local governments began digging a small tax potential. Currently, the collection is tight project is mainly urban land use tax and property tax . "Quan said.

Guangzhou Local Taxation Bureau stakeholders also revealed that all units and individuals shall, before the end of September, subject to urban land use tax and property tax.

Urban land use tax refers to cities, counties, towns, industrial and mining land use within the range of units and individuals to the actual occupation of the land area of ​​the tax basis.

According to Ministry of Finance data showed, in 2013 involving the highest share of real estate taxes are sales tax (real estate and construction), deed tax, land value increment tax , urban land use tax.

Guangdong Provincial Finance Bureau analysis of a person in a higher proportion of tax revenue, the sales tax and deed closely tied with the real estate transaction prices, fluctuation situation uncertain. The urban land use tax levied on fixed and larger base, several other undulating can ease the impact. The main thing is, urban land use tax is only levied on housing prices, but the use of land units and individuals, a broader scope.

"It's similar with Guangdong recent liquidation LAT strictly for local governments, because the task is daunting, the need to fully tap the potential of the tax." Guangdong Provincial Finance Bureau of the above pointed out, this is still not a large improvement in the local economy, real estate transactions downturn, for a place to land addiction fiscal tax purposes, the impact is obvious that local governments had to find another way.

Shijiazhuang, the Inland Revenue Department, announced that the strengthening of the area of ​​land use tax collection, the Urban Land Use Tax This "small tax" revenue pie bigger, so that the potential income tax highlights. 1-4 months of this year, the council warehousing land use tax 43.39 million yuan, compared with the same period last year income 30.5 million yuan, an increase of 236.6%.

Revenue and expenditure Ministry of Finance recently released data show that the tax aspects of real estate transactions in the same slowdown, June farmland occupation tax, urban land use tax has appeared more than 30% of high growth. From the overall situation in the first half, the Urban Land Use Tax completed 106.171 billion yuan, an increase of 16.6%.

In addition, a number of ground-level Local Taxation Bureau told reporters that the sales tax as the main pillar of the local revenue sources and, to the imposition of VAT, tax revenues will decline, the levy will be greater pressure in the second half, so the local government advance "prepare", due taxes.

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