In China, most residential property owners do not need to pay real estate taxes. In 2011, China initiated property tax trial programs in Shanghai and Chongqing, but even here, the taxes applied only to a few types of properties (newly purchased second homes and high-value properties, respectively) and the tax rates under these trial programs were quite low, and based on a property’s transaction price rather than its current appraised value. But this is about to change. President Xi Jinping’s administration sees a property tax as a key tool to achieve its goal of “common prosperity,” and last October, the government announced a major property tax reform, which is to begin with a five-year pilot program implemented at the local level in selected subnational jurisdictions. Under this reform, most residential property owners will need to pay property taxes, though local governments will have broad discretion to decide on the scope, rates, and collection procedures (see here and here).
Most of the debate about this dramatic change to China’s tax policy have focused on whether the proposed property tax can stop rampant speculation in the housing market and help redistribute wealth. Some commentators, though, have suggested that the new property tax might also help advance President Xi’s anticorruption campaign, because (it is argued) the tax will force greater disclosure of businessmen and government officials’ property ownership. But that hope is misplaced. In fact, the evidence so far suggests that the property tax reform might actually create more opportunities for corruption.