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Financing Sustainable Local Spending and Infrastructure in China

In: Beneficial Property Taxation for Emerging Market Countries

Author

Listed:
  • Ehtisham Ahmad

    (London School of Economics and Political Science)

  • Giorgio Brosio

    (University of Torino)

Abstract

China lacks a recurrent tax on residential properties, as ownership-valuation experiments in Shanghai and Chongqing failed to generate revenues. Instead, local governments have increasingly relied on land sales accruing to off-budget investment corporations and partnerships with property developers. The land sale model has resulted in urban sprawl and unsustainable migrations to the coastal mega metropolises, loss of prime agricultural and wetlands, but also increasing liabilities and rent-seeking opportunities. Simulations of the beneficial property tax model show that adequate revenues (1.5–2% of the GDP) can be raised quickly to replace land sales, be progressive, and anchor basic services and a more effective local government bond system. However, a within-province equalization system is likely to be needed in conjunction. A series of pilots were initiated by the State Council in 2021, as an effective local property tax is critical in ensuring adaptation in Chinese cities to meet distributional and environmental targets in the medium term.

Suggested Citation

  • Ehtisham Ahmad & Giorgio Brosio, 2022. "Financing Sustainable Local Spending and Infrastructure in China," Springer Books, in: Beneficial Property Taxation for Emerging Market Countries, chapter 0, pages 61-91, Springer.
    • Handle: RePEc:spr:sprchp:978-3-031-08612-0_4
    DOI: 10.1007/978-3-031-08612-0_4
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