Screen shot from Google Earth's satellite image of a Chinese ghost city. Via China's state own Xinhua News July 2013. Wary of the fallout over an overheated property market, some Chinese officials and high-profile think tanks have suggested that the country implement a property tax to stabilize the volatile industry, a proposition that is sparking intense debates on Chinese social media. Jian Kang, a delegate of the political advisory body Chinese People's Political Consultative Conference and a member of a government think tank on economic policy, has called for launching a property tax in a bid to quell a housing market full of rampant speculation, but he has also warned that the public shouldn’t expect the tax to sharply bring down housing prices, especially in the largest cities. As well, a deputy minister of China’s Ministry of Housing and Urban-Rural Development said in an official news conference in late February that the government was accelerating the legislation for a property tax. Currently, those buying property in China need to pay a number of taxes, including stamp duty, land value increment and income tax on the transaction. That means investors can hold a vast portfolio of properties and pay no annual tax on them after the initial purchase. The Chinese government experimented with introducing a property tax in the cities of Shanghai and Chongqing in 2011. But the tax rate is less than 1 percent and the regulations were carefully written to affect only the very wealthiest with the most expansive property holdings. The tax has had negligible impact on the property market in both cities. The reintroduction of the idea of a widespread property tax has triggered wide debate. Some believe that the full implementation will restrain speculation on the housing market and tame prices, while others believe that the taxation will encourage the market and push up prices. China’s government at all levels have long relied heavily on selling monopolized land for revenue. More than half of annual revenue in China’s largest cities such as Beijing, Shanghai and Guangzhou have stemmed from land sales. Fang Jianxin, a newspaper columnist, argued that the current housing market bubble stems from the monopoly of land by the government: 重庆市为何能做到房价平稳？是土地供应量大增自然抑制房价无序暴涨！体现管理者水平问题。很多地方政府官员依赖卖地搞建设，做政绩，这才是土地市场管不好的深层次原因。地价暴涨，房价自然难下跌！首先要控地价但地方政府收入就少，所以采取控地价的政策多数是隔靴搔痒。 Why are housing prices in Chongqing moderate? The increased supply of land will naturally suppress the price. This is a land management issue. Governments from other cities depend on land revenue for developing infrastructure and showing off their success. This is the root cause of the problem in land management. If land prices are high, housing prices will not drop. But if the governments reduce the price of land, their income will drop, and they don't have the motivation to do so. Such a revenue model based on land sales also would explain why China’s local governments have been keen to grab land from country folk, only to later sell it to developers, over the past decades. It also would suggest why it’s so difficult for the Chinese government to roll out a property tax, a policy taken in many developed countries — it might cool the property market and reduce revenue from land sales. Heavy reliance on the housing market for economic growth in China has ushered in exploding housing prices in the largest cities and oversupply in third- and fourth-tier cities. Soaring home prices in big cities have also fermented complaints and unrest among residents, which could pose a potential threat to the Chinese Communist Party’s ruling. China’s central government, however, does seem to be trying to get local governments to wean off selling land. Chinese President Xi Jinping declared during China’s central economic conference in late 2016 that “housing should be used to live in, not for speculation,” which many experts have expected might signal a tightening of regulations on the housing market. Economic Information Daily, a newspaper under the Chinese state news agency Xinhua's umbrella, touted that imposing a property tax could guide capital to flow from the virtual economy to the real economy, promoting industrial development which has long been vexed by a lack of capital. Caijing, a well-known finance magazine in China summed up Economic Information Daily's front page news on Weibo, China's most popular social media platform: 【经济参考报头版：房地产税有利资金“脱虚向实”】房地产税可能在短期内对住房市场造成一定影响，但我国现行较高的首付比，可以给予金融机构房贷资产质量充足安全垫；且房地产税有助于减少社会资金向房地产业聚集，反过来又会降低整体房地产金融杠杆，并引导资金“脱虚向实”。 A property tax could help capital flow out of the virtual economy to the real economy.