Abstract
Property tax reform in China has long been discussed regarding the reform agenda. However, nationwide implementation remains stalled, with no clarity regarding when and how property taxes will be levied. Uncertain expectations affect household housing assets, the most important assets of Chinese residents. To explore the impact of property tax levy expectations on the allocation of such assets, we construct a theoretical model and use four waves of China Household Finance Survey and Baidu index data for estimation. Property tax levy expectations significantly reduce the proportion of household housing assets to total assets, especially for high-income groups, nonrural hukou households, young-headed households, and households in first-tier cities. For multi-home households, the absolute housing asset quantity drops even more. Moreover, house purchase intentions mediate the impact of property tax levy expectations on household housing asset allocation. The findings provide new insights into upcoming property tax reform and highlight the need to develop differentiated property tax brackets and rates.
Acknowledgments
We thank Housing Policy Debate’s editors for editing this article and all four anonymous reviewers for their valuable comments, suggestions, and words of encouragement.
Disclosure Statement
No potential conflict of interest was reported by the author(s).
Data availability statement
The main data source for this article is the CHFS data by CHFS and Research Center (https://chfs.swufe.edu.cn/index.html). Internet search data come from Baidu Index (https://index.baidu.com/v2/index.html); further inquiries can be directed to the corresponding author.
Notes
1 Survey on Assets and Liabilities of Urban Residents in China in 2019.
2 State Council of China (1986).
3 In 2015, the 12th National People’s Congress Standing Committee Legislative Plan included property tax in the first category of legislative projects; in 2018 and 2019, the Government Work Report proposed a “sound local tax system and steadily promoting property tax legislation”; in 2021, the “14th Five-Year Plan in 2021,” the “Fourteenth Five-Year Plan” and the “2035 Visionary Goals Outline” mentioned “promoting property tax legislation, improving the local tax system, and gradually expanding local tax administration and management power.”
4 The Development Research Center of the State Council (2006) set the tax rate at 0.3–0.8%, considering the burden on residents at the initial stage of the expropriation. The research results of most scholars also show that the property tax rate r in China should be set below 1%. The value range of the discount rate r is based mainly on the Chinese market situation and related literature. The discount rate in Chen and Wen (Citation2017) is 4%. Furthermore, there is a link between the discount rate and the interest rate, with the literature arguing that the discount rate is the inverse of the interest rate or sums to approximately 1 (Aiyagari, Citation1994; Iacoviello & Pavan, Citation2013). China’s interest rate (interbank lending rate) has fluctuated at the 5% level for a long time, so this article considers a discount rate t is between 4% and 6%.
5 In October 2021, the Decision of the Standing Committee of the National People’s Congress on Authorizing the State Council to Carry out the Pilot Work of Real Estate Tax Reform in Some Areas officially mentioned that the units subject to property tax collection do not include legally owned rural homesteads and their upper residential buildings.
6 Special households with housing assets less than or equal to zero are not the main focus group of this article, nor are they directly affected by the introduction of holding property tax.
7 The original Chinese search term for “property tax” was “房产税,” and the original Chinese search term for “real estate tax” was “房地产税.”
8 Prior to September 2013, there were missing news headline data.
9 In China, Chongqing and Shanghai have the same administrative status as provinces.
10 China’s “hukou system” is a compulsory resident status management system in which each resident must register at his or her location (mainly the place of birth), which currently consists of two types of hukou: rural and nonrural. In many cases, such as in the areas of education, health care, housing, and social security, a resident’s household registration determines the scope and standard of benefits and services available to them.
11 City line level refers to the hierarchical division of cities based on their size, economic development level and urban influence, and is divided into four categories from high to low: first-tier cities, second-tier cities, third-tier cities and nonline level cities. According to the information provided by CHFS, this article classifies cities into first-tier cities (including new first-tier cities), second-tier cities and third-tier cities and below, as shown in “2021 City Business Attractiveness Ranking” (https://www.yicai.com/news/101063860.html)
12 A measure of fiscal pressure on provincial governments is (annual fiscal expenditure–annual fiscal revenue)/annual fiscal revenue.
13 Statistics on the sample reveal that households with two or more homes account for approximately 20.66% of the total number of households, while those with three or more homes account for approximately 2.64% of the total number of households.
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Notes on contributors
Youmeng Wu
Youmeng Wu is a lecturer at the School of Business, Anhui University of Technology. His current research interests include housing policies and household consumption.
Hongliang Sun
Hongliang Sun is a postgraduate student at the School of Business, Anhui University of Technology, China. His current research interests include family finance and real estate economics.
Xianzhu Wang
Xianzhu Wang is a professor and doctoral supervisor at the Business School of Anhui University of Technology. His research interests are in real estate finance and economics.
Mengkai Chen
Mengkai Chen is an associate professor at the school of Management Science and Engineering, Anhui University of Technology. His current research interests include housing policies and real estate market.
He Huang
He Huang currently is a postgraduate student at Anhui University of Technology, China. Since 2019, he had been researching the issues related to the real estate economics and urban studies.
Meng Li
Meng Li is a postgraduate student at the School of Economics, Minzu University of China. Her current research are mainly focus on real estate economics and finance.