By Du Tao (杜濤)
Issue 626, July 01, 2013
Special, page 02
Translated by Shuqi Luo
Original article: [Chinese]

How much tax should one pay on a home in China?

In theory, the number should be 12 percent of the home’s price. However, if all the hidden fees are factored in, this percentage expands to about 25 percent.

Research by the Economic Observer found that these fees are related to a series of authorization procedures, many of which overlap with one another and create redundant charges.  

According to a report by the Research Institute for Fiscal Science of the Ministry of Finance (財(cái)政部財(cái)科所), there are 12 co-existing types of taxes and 56 categories of fees which make up the property tax (房產(chǎn)稅) and the urban land use tax (城鎮(zhèn)土地使用稅).

Statistics from the Ministry of Finance show that in 2012 the 12 taxes associated with property constituted 16.6 percent of total local fiscal revenue across the nation. Of this, most came from the business tax (of the real estate and construction companies), contract tax, land appreciation tax, urban land use tax and property tax.

The most recent data indicates that, in spite of China’s economic slowdown, the income from these taxes is still booming. In May of 2013, due to the exponential growth in the turnover of real estate market, contract tax income grew by 40 percent. The land appreciation tax and business tax grew by 27.4 and 13.8 percent respectively.

Mysterious Fees

The contribution that the real estate industry makes to local fiscal revenue goes beyond taxes. In a proposal presented by Wang Chaobin (王超斌) and 10 other members of the National Committee of the Chinese People’s Political Consultative Conference (CPPCC 全國(guó)政協(xié)) in 2008, they mentioned that over 50 fees are compulsory for Chinese real estate developers, including a lightning protection inspection fee (防雷檢驗(yàn)費(fèi)), shockproof inspection fee (防震檢驗(yàn)費(fèi)) and construction contract verification fee (施工合同鑒證費(fèi)). These fees are charged by 25 different local governmental departments and together makeup 15 percent of the final home price on average.  

Developers have complained that several of these fees overlap and lead to redundant charges. From design to inspection they may face the same charges at several different stages of construction.

Another complaint is that charges are wildly inconsistent.  For instance, real estate developers that have a close relationship with the local Residential Construction Commission (地方住建委) may pay only pay an 80 to 100 yuan property fee per square meter, while developers without such connections might pay well over 1,000 yuan.

Vice Director of the Research Institute for Fiscal Science Wang Chaocai (王朝才) told the Economic Observer that it’s necessary to abolish several unreasonable fees and establish standardized rules.