A revived capital gains tax imposed on Chinese real estate
developers has brought hope to many Chinese citizens who can not
afford to buy an apartment.
China announced on Wednesday the enforcement of a land
appreciation tax of 30 to 60 percent on net gains made from all
property development deals. With the new rules, real estate
developers' juicy profits will be cut in half.
"It is a lot of money. Will the government build more affordable
houses for us with it?" said Tian Yu, a 23-year-old girl who
graduated last summer and now teaches at a Beijing-based
university.
According to the regulation, the government will collect the tax
as soon as development projects are finished or transferred. But it
did not elaborate how the tax revenue would be spent.
Housing prices have been rocketing in Chinese cities over the
last couple of years. Thursday's figures from the National Bureau
of Statistics showed that the price of newly-built apartments in
Beijing rose 10.4 percent year-on-year last December.
New apartments within Beijing's fifth ring road have all seen
their prices exceed 10,000 yuan (US$1,200) per square meter.
For young college graduates in Chinese cities, buying an
apartment near their offices has become a mission impossible. The
government finances a few real estate projects and sells these
"affordable houses" to young people every year. But compared with
the huge demand, they are far from enough.
Tian Yu learned about the tax news from Thursday's newspapers
and is glad the fat profits of real estate developers will be
squeezed. "Developers do not make any technical innovations. They
just get cheap land, employ low-paid migrant workers to construct
buildings, then sell them to consumers, earning a 100 percent
profit."
But Tian was disappointed the government did not reveal how they
would use the tax revenue. "The money should be put into a special
account and used for building more affordable houses," she
said.
Zhang Yang, a student studying economics at a Beijing-based
university, said that as the Chinese government would get even
richer with the collection of the new tax, it should make good use
of the money.
Official statistics showed that China's total tax revenues
reached a record high of 3.8 trillion yuan (US$480 billion) in
2006, an increase of 22 percent year-on-year.
Moreover, the country's foreign exchange reserve exceeded one
trillion US dollars at the end of 2006, up 30.22 percent over that
at the end of 2005.
"The government is rich, but many people are still poor," said
Zhang. "The government should spend the money properly and put
people's living needs at the top of their agenda."
Zhang has another concern about the new tax. "The real estate
developers might transfer the tax burden to consumers and push up
the housing prices even higher."
"Then the housing dream will be even further away," said
Zhang.
(Xinhua News Agency January 19, 2007)