China has decided to levy a business tax on the full profits from house sales if owners sell them on within two years of purchase.Economists say it is a major step towards discouraging real estate speculation.
The government will also levy a business tax on the difference between the purchase and resale price of non-ordinary residential housing, if owners sell up more than two years after their initial purchase.However, sales of ordinary homes will not be subject to the business tax if more than two years pass between purchase and resale.
Wang Zhao, a senior researcher with the State Council Development Research Centre, said the latest measures, which were announced on Wednesday in a circular jointly issued by seven government departments, were targeted at excessive real estate investment and rising housing prices.
Healthy development of the real estate industry is crucial for economic and social development, Wang said.The government needs to use taxes and other economic measures to adjust the real estate market and strengthen control of housing purchases for speculative and investment purposes, he said.
China’s average housing prices rose 14.4 per cent last year, despite the government taking a series of macro-control measures, including an interest rate rise, to cool the market.Average housing prices rose a further 12.5 per cent year-on-year during the first quarter of this year.
