Frontiers in Business, Economics and Management 
ISSN: 2766-824X | Vol. 13, No. 2, 2024 

 

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Research	on	the	Historical	Evolution	and	Development	
Trends	of	Property	Tax	in	China	
Yiyang Xu1, * 

1Beijing Technology and Business University, Fangshan, Beijing, 102400, China 
* Corresponding author: 724489007@qq.com* 

 

Abstract: The reform of property tax, as a focal point of our country's tax reform, is closely intertwined with the development 
of the national economy and the well-being of the people. Based on the background and progress of property tax reform, this 
paper conducts an in-depth analysis of relevant literature and policy documents, studying the evolution of property tax in different 
historical periods. It also provides an evaluation of the current property tax system and suggestions for future development. The 
paper will further explore existing issues in the implementation of property tax, analyze potential solutions, and put forward 
recommendations and directions for property tax reform. 

Keywords: Property tax; Reform; Pilot. 
 

1. Development Overview and 
Literature Review 

1.1. Development Overview 
Tracing back to the 1980s, the concept of property tax was 

first introduced in 1986 when the national government issued 
the "Interim Regulations of the People's Republic of China on 
Property Tax." Due to the difficulties in implementation, there 
was little action following the release, and formal collection 
did not commence. In October 2003, during the Third Plenary 
Session of the 16th Party Congress, the idea of levying 
property tax under certain conditions was initially proposed, 
drawing widespread attention from society. In 2010, the 
national government decided to gradually advance the reform 
of property tax. In 2011, pilot programs for property tax 
reform were initiated in Shanghai and Chongqing. In the 10th 
meeting of the Central Finance and Economic Affairs 
Commission in 2021, it was emphasized to "actively and 
prudently promote legislation and reform of real estate tax 
and carry out pilot work effectively." On March 16, 2023, 
Xinhua News Agency conducted an interview with relevant 
officials from the Ministry of Finance regarding the pilot 
work on the real estate tax system. According to insiders, 
based on the authorization of the Standing Committee of the 
National People's Congress, some cities have conducted 
investigations and preliminary studies on the reform pilot of 
property tax. However, after a comprehensive analysis of 
various aspects, the scope of the pilot cities for real estate tax 
reform cannot be expanded within this year.   

1.2. Literature Review 
Currently, research on the pilot reform of property tax in 

China is primarily focused on the following five aspects: First, 
analyzing the impact of the implementation of the property 
tax policy on the overall economic trends; Second, examining 
the influence of property tax as a local tax on the fiscal 
revenue of the collecting regions; Third, studying the changes 
in housing prices in pilot cities after the implementation of 
property tax; Fourth, analyzing the variations in disposable 
income of residents in pilot cities after the implementation of 
property tax; Fifth, assessing the impact of the reform on local 

basic public services. 
After reviewing the literature on property tax reform, we 

have summarized and distilled the research processes and 
results of various scholars. Duan Shou'an (2014) argues that 
as a local tax with a relatively low tax rate, property tax has 
an unclear impact on the improvement of local fiscal revenue 
and has a limited scope in redistributing social wealth. Zhan 
Peng and Li Shi (2015), through analyzing data from 16 
provincial urban residents, found that property tax could 
effectively narrow income gaps. Li Yonggang (2015), by 
simulating the economic effects of levying property tax, 
concludes that property tax not only can curb the growth of 
housing prices but also effectively increase local fiscal 
revenue and social welfare. Hu Yijian and Fan Yannan (2016) 
believe that property tax, levied on immovable properties 
such as land and buildings, compared to land transfer income 
and transfer payments, possesses sustainability and autonomy. 
It also has advantages such as abundant tax sources, broad tax 
base, and stable income, making it the optimal choice for local 
taxation. Huang Hong et al. (2017) argue that property tax 
reform may initially lead to a downturn in the real estate 
market, causing a decline in local fiscal revenue and 
subsequently impacting the overall macroeconomic downturn, 
creating a "domino effect." Duan Meng and Lou Feng (2021) 
employ a dynamic stochastic general equilibrium model to 
demonstrate that property tax reform can adjust the urban-
rural income gap. 

2. Current Status and Problem 
Analysis 

2.1. Current Status 
2.1.1. Shanghai Pilot Policy 

Shanghai imposes property tax on newly purchased second 
or subsequent residential properties throughout the city, 
including newly purchased second-hand properties and newly 
constructed commercial housing (referred to as "taxable 
housing"). The tax also applies to newly purchased properties 
for non-residents of the city (referred to as "taxable housing"). 
The calculation is based on the market value of the property, 
using the assessed value of the property as a reference, and 
the property is revalued within the specified timeframe. In the 



 

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initial years, the tax may be temporarily levied based on 70% 
of the market value of the property. Currently, the property 
tax is temporarily set at a differential tax rate ranging from 
0.4% to 0.6%. The applicable tax rate is temporarily set at 
0.6%, but if the market transaction price per square meter of 
the taxable housing is less than twice the average selling price 
of newly constructed commercial housing in the city in the 
previous year (inclusive of twice that value), the tax rate can 
be temporarily reduced to 0.4%[2]. 

2.1.2. Pilot Policy in Chongqing 
In Chongqing, property tax pilot programs are being 

implemented in nine main urban districts, including Yuzhong, 
Yubei, Jiangbei, Dadukou, Beibei, Jiulongpo, Nan'an, 
Shapingba, and other districts. The property tax in Chongqing 
targets standalone self-used commercial properties and high-
end commercial properties purchased by individuals without 
household registration, unit affiliation, or employment. 
Additionally, it applies to second or subsequent ordinary 
residential properties purchased. Under specified conditions, 
the tax can be calculated based on the appraisal value of real 
estate. For residents in Chongqing without household 
registration, unit affiliation, or employment, who purchase 
second or subsequent ordinary residential properties, the tax 
rate is set at 0.5%. For standalone commercial residences and 
high-end housing, the tax rate is 0.5% for properties with a 
transaction unit price per square meter below three times the 
average transaction unit price of newly constructed 
commercial housing in the main urban districts of the 
previous two years. For properties with a unit price three 
times (inclusive) to four times, the tax rate is 1%, and for 
properties with a unit price four times (inclusive) or above, 
the tax rate is 1.2%[2]. 

2.1.3. Comparative Analysis of Policies in Two Locations 
2.1.3.1 Scope of Applicability and Price Determination  
The implementation scope of property tax in Shanghai 

covers the entire administrative divisions of the city, with the 
'new house selling price' being the selling price of new houses 
in Shanghai from the previous year. In Chongqing, the pilot 
program is conducted in the nine main urban districts of 
Chongqing. The 'new house selling price' is calculated as the 
average of the selling prices of commercial housing in the 
main urban districts from the two years prior. 

2.1.3.2 Whether the existing property has been 
expropriated 

All properties in Shanghai are exempt, while existing 
standalone residential properties in Chongqing will be subject 
to the tax. 

2.1.3.3 Chongqing relaxes restrictions on newly purchased 
general residential properties 

For local residents in Shanghai: Property tax will be 
uniformly levied based on the original price for non-local 
residents' first-time purchases of second or subsequent 
residential properties (both new and second-hand).In 
Chongqing, property tax will be imposed on local residents 
for self-use properties (both existing and new properties) and 
newly constructed high-end housing (priced more than twice 
the transaction price of new housing in the urban area). 
Additionally, property tax will be applied to non-local 
residents (without household registration, employment, or 
unit affiliation) purchasing a second property. 

2.1.3.4 Applicable Tax Rates 
Shanghai has two tax brackets with rates of 0.4% and 0.6%, 

while Chongqing has three tax brackets with rates of 0.5%, 
1%, and 1.2% respectively. 

2.1.3.5 In Shanghai, a 30% discount is applied in the 
calculation of property tax 

In Shanghai, property tax is levied based on the residual 
value of the property (70% of the original value). 

2.2. Analysis of Issues 
The pilot property tax reforms in Chongqing and Shanghai 

serve as important explorations by the country in reforming 
housing taxes. The differences in the two tax reform models 
have posed a series of challenges. Due to a lack of 
comprehensive considerations, these models are not 
universally applicable in the short term. While they have 
played a role in adjusting the supply and demand relationship 
in the real estate market, they have not been highly effective 
in restraining the rise of property prices. Moreover, as China 
is still in the process of urbanization, many new first-tier and 
second-tier cities are experiencing rapid expansion and high-
speed development in the residential market. Therefore, the 
country currently lacks the necessary prerequisites and 
conditions for the widespread implementation of property 
taxes. In summary: 

(I) Difficulty in determining the taxable basis 
The clarity, transparency, and openness of the taxable basis 

for property tax directly impact its fairness and the feasibility 
of future tax collection. This issue is crucial for the fairness 
of property tax and the feasibility of its future collection. 

China has diverse types of real estate, including 
commercial properties, resettlement housing, and residential 
land, making it challenging to define the valuation basis for 
property taxes. The assessment process incurs high costs. 
During the valuation of properties for taxation purposes, 
relying on real estate transaction prices as the calculation 
basis may lead to an imbalance in property tax revenue in a 
region, lacking fairness. At the same time, as a form of 
property tax, property tax targets assets, and assets lack 
liquidity. They represent the accumulated value of social 
wealth over the years rather than the market price at a specific 
moment. In the process of real estate transactions, treating the 
value of immovable property as equivalent to movable 
property would diminish the property tax nature of real estate 
taxation, making it more akin to a commodity tax. To 
emphasize the property tax nature of property taxes better, 
taxing existing real estate is necessary. However, accurate 
data on existing real estate, including its nature and value, 
require significant resources and efforts, making it 
challenging to achieve in the short term in China. 

(II) Controversial Policy Objectives 
Tax revenue is a crucial component of national fiscal 

income. According to the principle of tax neutrality, after 
taxation, it should not impact the optimal allocation of social 
resources formed under the self-regulating function of the 
market, nor should it create an excessive burden beyond the 
tax burden. However, in the context of the rapid expansion of 
the real estate market and the persistent enthusiasm for 
property speculation, the limitations of the market economy 
become increasingly apparent in the face of the experimental 
property tax reform policies. At this juncture, the theory of tax 
neutrality is not readily applicable. 

Therefore, it is necessary to integrate tax policies with 
national policies, leveraging the regulatory function of 
taxation to conduct macroeconomic control on the market. 
The primary objective for taxable entities is to control real 
estate prices. However, in experiments with real estate price 
controls conducted in areas like Shanghai and Chongqing, the 



 

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anticipated effects of controlling real estate prices were not 
achieved, and public expectations were not met. This has led 
to a series of issues, including a general lack of enthusiasm 
for taxpayers. On one hand, for wealthy individuals, real 
estate constitutes a small proportion of their total assets, and 
the imposition of property tax may not have a significant 
impact. On the other hand, for individuals who have taken out 
loans to purchase homes for essential needs, they bear higher 
loan interest and greater loan pressure, making the imposition 
of property tax only further exacerbate their economic burden. 
Consequently, the regulatory effect of property tax on 
residents' income is significantly constrained, and how to 
enhance its effectiveness becomes a substantial issue. 

The reform of property tax based on individual residences, 
overall, has reduced residents' disposable income, leading to 
a decrease in consumption expenditure and a decline in 
residents' lifetime utility. However, from an overall 
perspective, local government revenue has increased to some 
extent. Therefore, property tax reform may have a restraining 
effect on property prices, but the impact of this restraint is 
smaller than the growth effect on local government revenue. 
At the same time, for regions such as Shanghai and 
Chongqing currently, property tax accounts for a small 
proportion of local taxation, contributing insignificantly to 
tax revenue. Compared to its high taxation costs, considering 
the perspective of maximizing revenue, property tax is 
challenging to effectively promote in the short term. 

(III) Limited Tax Coverage 
In cities where property tax pilot programs are 

implemented, the tax coverage for property tax is relatively 
narrow, with broad exemptions and a limited coverage of the 
population. Property tax involves taxing the ownership of 
residential properties, and in China, there are various types of 
property rights, such as affordable housing, public rental 
housing, commercial housing, resettlement housing, military 
housing, etc. These properties have significant legal 
differences in terms of their sources of income and usage. 
Therefore, it is challenging to unify their valuation, definition, 
and management.In the pilot cities, the scope of exemptions 
is extensive, covering the majority of the population. With the 
rapid development of the market economy, housing provided 
by public institutions has gradually shifted from being non-
profit to profit-oriented. This change in nature has directly led 
to the loss of national tax revenue. 

Moreover, as a socialist country, China's property 
ownership is limited to a finite number of years rather than 
full ownership when purchasing real estate. Taxing 
incomplete property rights itself raises a series of 
controversies. Since China has not yet achieved nationwide 
networking of real estate registration, how to utilize big data 
to analyze the scope of tax collection, and scientifically 
design the standards and range of taxation, will be an urgent 
problem that needs to be addressed in our next steps. 

3. Development Directions 

3.1. Improving China's Real Estate 
Registration System 

A well-established real estate registration system in 
China is the fundamental guarantee for clarifying the 
taxpayer's main body and an essential condition for smooth 
tax collection. To better promote the nationwide 
implementation of property tax and facilitate the enactment 
of relevant laws, it is essential to fundamentally address the 

issue of the tax basis for property tax. 
The rapid development of the internet has driven the 

digital transformation of national administration, providing 
a real-time resource-sharing platform for tax authorities, 
land bureaus, developers, and other key departments. This 
breaks down information barriers, achieving 
interoperability and sharing of information. Promoting the 
categorization and valuation of houses across the country, 
conducting online networking and recording, and creating 
individual files for each property are beneficial for 
conducting tax collection work systematically. Through the 
valuation of different properties, it is conducive to 
scientifically formulating a comprehensive set of collection 
standards, providing people with a clearer understanding of 
the ownership of their residential properties.Simultaneously, 
a clear distinction needs to be made between fully paid and 
mortgage-financed homes. Fully paid homes may incur 
higher tax payments, while those purchased with a 
mortgage may have lower or no tax payments. This 
approach helps to avoid placing a greater economic burden 
on taxpayers facing significant life pressures. Subsequently, 
it becomes possible to achieve a secondary distribution of 
property taxes, regulate social wealth disparities, and 
promote social equity. 

3.2. Strengthening the Local Financial 
Information Disclosure System 

Starting from the current tax functions and drawing on 
international research on property taxes, reinforcing the 
fiscal functions of property taxes is essential for 
establishing a systemic arrangement for long-term real 
estate market regulation. Enhancing the transparency of the 
local financial disclosure system, particularly in the 
collection and utilization processes of property tax 
revenues, contributes to the effective use of tax funds for 
taxpayers themselves. This can enhance the value of 
housing, providing property owners with a greater sense of 
acquisition.By making the property tax collection and 
usage processes transparent, the system aims to improve the 
value of housing, ensuring that the benefits of tax revenues 
are directly applied to the taxpayers. This approach not only 
boosts taxpayers' enthusiasm for tax payment but also 
fulfills the fiscal function of taxation, reflecting the 
socialist nature of taxation as "taking from the people and 
using it for the people." This model enables property tax to 
effectively regulate the growth rate of housing prices, 
prevent significant declines, positively impact government 
finances, and contribute to a virtuous cycle in housing 
prices. 

3.3. Accelerating the Legislation of Property 
Tax 

The legal framework for property tax has been proposed 
in our country for quite some time, and in the "14th Five-
Year Plan," there is again an emphasis on improving the 
legal system for property tax. Despite some pilot cities 
implementing property tax trials, the lack of uniform legal 
documents for regulation and standardized tax assessment 
has resulted in less-than-ideal outcomes. Therefore, 
expediting the legislative process for property tax becomes 
a crucial pathway to deepen property tax reform. 

Firstly, by enacting relevant laws and regulations, it is 
essential to standardize aspects such as property tax 
collection and the tax obligations of property owners. This 



 

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will ensure supervision and management throughout the 
entire property tax collection process, guaranteeing its 
rationality, fairness, and effectiveness. Secondly, gradually 
establishing a nationwide unified property tax system with 
standardized tax regulations is imperative. Due to 
differences in housing prices, urban economic development 
levels, and other factors among different cities, the tax 
standards in pilot cities have not achieved uniformity. 
Establishing a national property tax system, with unified 
regulations for taxpayer participation, taxable objects, and 
tax items, and differentiated adjustments in terms of tax 
rates and tax incentives, would contribute to broadening the 
coverage of property tax while achieving tax 
fairness.Additionally, the country should simultaneously 
establish a dedicated administrative body for property tax 
collection. Setting up a specialized property tax 
management institution responsible for overseeing and 
supervising property tax collection, promoting and 
educating taxpayers about property tax, and supervising 
and evaluating property assessments and valuations is 
essential. 

As property tax is a local tax collected by local 
governments and closely related to the lives of every citizen, 
local governments should have the right to adjust their 
income distribution based on local economic development 
conditions. Therefore, citizens should participate in the 
formulation of property tax laws[8]. 

3.4. Improving the Pension System 
In our country, for the majority of ordinary wage-earning 

families, the primary asset is real estate. However, in a 
China where the pension system is not yet fully developed, 
retirement pensions and elderly insurance benefits are 
relatively low, and the social welfare system is not 
comprehensive enough to support the daily lives of the 
elderly. If property tax is suddenly imposed, the disposable 
income of the elderly will be directly affected. To carry out 
property tax reform, it is necessary to reasonably tax 
various types of housing and develop a scientifically sound 
tax base based on the characteristics of different groups. 
Additionally, there is a need for a more profound 
improvement in the national pension system, making 
"support and care for the elderly" a reality. 

4. Conclusion 
Taking into account the current situation of property tax 

trials in Shanghai and Chongqing, it is evident that the 
specific implementation methods and tax scope of property 
tax trials need further clarification and improvement, and 
there is a considerable gap between actual effectiveness and 
public expectations. 

Although Shanghai and Chongqing have introduced 
corresponding tax systems based on their respective 
characteristics, there are still many issues to be addressed. 
The unique attributes of these two directly-administered 
municipalities and their specific economic development 
characteristics determine that the current tax systems 

cannot be universally extended nationwide. Moreover, the 
lack of a nationwide real estate registration and filing 
network, as well as clear distinctions between types, 
attributes, and prices of real estate, means that we lack the 
necessary conditions to establish a scientific tax base. 
Regarding the formulation of related preferential policies, 
the absence of corresponding investigations and big data as 
a foundation means that, at present, the cost of levying 
property tax exceeds the revenue generated.Looking at the 
implementation processes of related reforms and tax rules 
for other property taxes, the issue of duplicate taxation of 
properties often arises in the collection process. Therefore, 
property tax reform must take a comprehensive approach, 
considering the entire system, and streamline and integrate 
the taxation process and relevant legal foundations. 
Meanwhile, China is gradually progressing in promoting 
local financial transparency, national real estate filing, local 
financial disclosure, and the improvement of the pension 
insurance system. However, meeting the requirements for 
property tax reform in a short period remains challenging. 
Additionally, legislation should play a guiding role in the 
reform, ensuring the protection of citizens' legal rights 
while adhering to the principle of tax legality. 

This paper believes that the construction of the property 
tax system is a formidable task, and in the medium to short 
term, the system is still in the stage of accelerating 
promotion and improvement, making it less likely to be 
implemented nationwide. 

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