Design Features of the Local Property Tax Pilots

Abstract

China introduced the real property tax in urban areas in January 2011. The new policy was announced on January 27 and went into effect the next day, presumably to stem any possible distortionary housing market behavior. As has been the case with almost all major policy initiatives, the Chinese government launched this potentially politically loaded tax reform first as a pilot project in order to test the political acceptability of the tax, its technical soundness, as well as any administrative aspects. Rumor goes that multiple metropolitans were on the initial list of pilots, including Shanghai, Chongqing, Beijing, and Shenzhen; but the final pilots included only the first two. In this chapter, we briefly review China’s national laws and local administrative rules with regard to the real property tax.