Taxation Begins at Home

Related entries: Economy, General, Investment, Risk & Law

The latest economic cooling measure is the imposition of capital gains tax of 20 percent of profits on the sale of homes (though residential owner-occupiers, in a property for over five years, can get exemptions). The measure was announced in late July and took effect from August 1st – giving little time for investors (or speculators, depending on your political perspective) to adapt.

The Wall Street Journal notes that the State Administration of Taxation said this move was really just enforcing an earlier regulation from 1994:

    “This notice isn’t a new policy, but is merely an improvement to existing regulations,”

Ah, the wonders of Chinese regulation and enforcement! (More on which is below).

As well as curbing speculation, new regulations are pushing developers to build more low-cost housing. The regulations state that at least 70 percent of new developments should have a floor area under 90 meters (though some are getting around the regulations, see here). As well as dealing with an economic problem by taking pressure off prices, the move also has political motives – and should give more (otherwise angry and resentful) people access to their own homes.

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