Tax, the new revolution in China
By George Chen
The opinions expressed are the author’s own.
Karl Heinrich Marx spent most of his lifetime studying how to distribute social wealth fairly, and later Vladimir Ilyich Lenin concluded that violent revolution should be the way. In China, Mao Zedong picked up some ideas from Marx and Lenin and a “new China” was eventually created. We all know what has happened since then.
Today in Shanghai and Chongqing, two of the richest cities in China, the local governments discussed how to distribute and balance social wealth, ideally for every citizen in the country. They decided to use financial tools rather than revolution, hence the new property tax.
Chongqing Mayor Huang Qifan said could help the city increase its revenue from the property sector to 200 million yuan (about 30.4 million U.S. dollars) this year. Huang was considered a Liberal as he helped Shanghai open up its Pudong New Area, the emerging Wall Street in China.
The reaction? An online poll on China’s top portal Sina.com showed this morning that nearly 60 percent of respondents voted against the property tax plan and more than 40 percent said they did not expect the new tax to lower property prices. Many analysts and officials in other cities are now interested to see how Shanghai and Chongqing are going to collect the tax –0.6 percent for Shanghai and 0.5-1.2 percent for Chongqing, both announced late on Jan. 27 and effective from Jan. 28 — in a peaceful and practical way.
Others cast doubt over the policymaking process — shall we have a consultation with taxpayers or at least go through local lawmakers, who are considered “representatives of the people”, for ideas before making a decision?
The mayors of Shanghai and Chongqing, picked by the central government as the two pioneer cities for property reform, both said the new tax they plan to collect, largely from the fast-growing middle-class, will mainly be spent on building more cheap, affordable public housing for low-income people, hence redistributing social wealth. A very socialist idea.
In my humble view, three factors are worth bearing in mind: First, all things considered, I don’t think the new property tax will bring prices down (read my column “Property under attack in China” on Jan. 27). Second, the property tax is a strong political signal from the government aimed at winning the hearts and minds of the poor, but it could certainly hurt the feelings of the middle-class.
Third but not least, watch out, Hong Kong, Australia, Canada and so on, you may see more Chinese immigrants buying property, little by little, if not in a rush from tomorrow.
So, should we pay a bit more attention to Hong Kong developers? Maybe they’ll see better earnings this year if there are more property buyers from the mainland. Oops! What is Hong Kong Chief Executive Donald Tsang going to do to keep the city’s property prices from climbing?
That’s another story, but at least most people in Hong Kong don’t believe that socialism can really work.
George Chen is a Reuters editor and columnist based in Hong Kong.
Photo: Portraits of Russian and Chinese communist leaders (from-L) Karl Marx, Friedrich Engels, Vladimir Lenin, Mao Zedong, Zhou Enlai, and Deng Xiaoping are displayed at a bookstore in Chengdu, capital of China’s southwestern Sichuan province, July 19, 2004.REUTERS/Bobby Yip