[Epoch Times June 11, 2021](Epoch Times reporters Li Xiaotong and Luo Ya Hong Kong reported) On June 4, the Ministry of Finance of the Chinese Communist Party and the three departments jointly issued a notice stating that the state-owned land currently expropriated by the natural resources department of the Chinese Communist Party will be The four government non-tax revenues, including the income from the transfer of use rights, are transferred to the taxation department for collection. Afterwards, it attracted public attention. Not only did some analysts point out that the CCP strengthened centralization by confiscating local “financial power”, but also some insiders said that this might lead to local urban investment defaults. In addition, some senior investors believed that the underlying problem was the local government. Relying on income from land transfers is no longer sustainable.
The website of the Ministry of Finance of the Communist Party of China issued a report on June 4, entitled “Regarding the transfer of four government non-tax revenues from the transfer of state-owned land use rights, special income from mineral resources, sea area use gold, and non-resident island use gold to the taxation department for collection. Notice of related issues” (referred to as “Notice”).
The notice stated that the four government non-tax revenues collected by the natural resources department from the transfer of state-owned land use rights, special income from mineral resources, sea area use funds, and non-resident island use funds will all be transferred to the taxation department for collection. From July 1, 2021, pilot collection and management duties transfer will be carried out in Hebei, Inner Mongolia, Shanghai, Zhejiang, Anhui, Qingdao, and Yunnan provinces; and from January 1, 2022, the transfer of expropriation will be fully implemented.
The notice also mentioned that the taxation department is responsible for collecting and storing the unpaid income and the income paid in installments in the previous years and in the future. The specific collection agency is the relevant province (autonomous region, municipality directly under the Central Government, and separate plan of the State Administration of Taxation). City) Taxation Bureau to determine. The collection and management responsibilities of these four income items collected by the Ministry of Natural Resources (at this level) are transferred to the Beijing Municipal Taxation Bureau of the State Administration of Taxation.
After the news was issued, it continued to trigger market discussions.
Analysis: Beijing confiscated local “financial power” to strengthen centralization
On June 5, Wang Jian, a former Hong Kong media veteran, analyzed in the “Wang Jian Daily Observation” program that the financial reforms carried out by the Chinese Communist Party are also strengthening centralization. Wang Jian pointed out that the four income items mentioned in the “notice” were put into the local government’s treasury after expropriation, and now they have to enter the central government’s treasury. Not only the land transfer of gold, but also the special income of mineral resources is also a large amount of income. This is the central government’s concentration of “financial power.”
The centralized collection and management of property rights can be traced back to 2018. In July 2018, the CCP authorities completed the merger of national taxation and local taxation. According to the CCP’s overall arrangement for the reform of the national taxation and local taxation system, the next step is to promote the transfer of social insurance premiums and non-tax revenue collection and management responsibilities. Previously, local governments collected social security funds through the Social Security Bureau. Since November 1 of last year, tax authorities in many places in China have begun to hand over various social insurance premiums for corporate employees to tax authorities for collection.
Wang Jian analyzed that this taxation department is also the National Taxation Bureau. With the transfer of land transfer fees to the national tax collection this time, local governments have gradually lost local taxes, social security fees, and land transfer fees. As a local government, they can only wait for the central government to pay. Money, and the central government has strengthened centralization. Next, it will involve the issue of how the central and local governments allocate funds.
Previously, the central government’s mechanism for regular transfer payments to local governments was “delivered at various levels.” Wang Jian said that since the outbreak of the epidemic in 2020, the authorities have adopted a direct mechanism for fiscal funds, and the State Council has asked the provincial government not to detain and become a god of wealth. Recently, the State Council of the Communist Party of China is normalizing this mechanism and expanding its scope.
Development manager: the central government tightened the money bag or caused the city investment to default
Regarding the possible impact of the unified expropriation on the local government and the real estate industry, Ms. Li, the development manager of a mainland real estate company, said that the land transfer fee is the money bag of the local government, and the central government must control this money bag now. She also pointed out the impact from four aspects.
The first is to affect land acquisition by real estate developers. Ms. Li said that in the past, real estate merchants would help local governments to drive up land prices, and “land kings” appeared. Some local governments also received a lot of land transfer fees, but many of them were returned to real estate developers in disguised form. Secondly, the land transfer fee accounts for a high proportion of local government revenue. The central government does not know how many local governments have. After centralized expropriation, it will help the central government find out the actual financial situation of local governments.
In 2020, revenue from the transfer of state-owned land use rights in China was RMB 8,414.2 billion, a year-on-year increase of 15.9%; in the same period, local general public budget revenue at this level was RMB 1,012.4 billion, a year-on-year decrease of 0.9%. Land transfer revenue accounted for 84% of the local general public budget.
In addition, Ms. Li’s analysis pointed out that the local government cannot arbitrarily control the land funds when the land funds are paid. Indirectly, the credit of the local governments is reduced, and local urban investment companies may default on their debts in the future.
The fourth aspect is that the central government must guard against financial risks, regulate real estate prices, and prevent systemic collapse. Ms. Li analyzed that if the central government wants to truly control the property market and avoid risks, it must clear mines from two aspects. One is the bank and the other is the local government. Therefore, the land finance cannot be bypassed. The local government has the logic of making money by selling land. The central government also believes that local governments rely too much on the real estate industry and passively implement the central government’s policy of regulation and underpricing, which has led to a continuous rise in housing prices.
Ms. Li believes that the characteristics of the mainland property market in the future will be: increased participation of central enterprises and the implementation of real estate taxes by the central government.
Investor: Land transfer fees are no longer sustainable
In an interview with The Epoch Times, senior US investment consultant Mike Sun pointed out that the CCP’s introduction of this policy has exposed a deeper problem-land transfer fees are no longer sustainable. He said that the central government is collecting “financial power,” but many analysts say that the power of control is still owned by the local government. In mainland China, land is owned by the CCP authorities. Therefore, the CCP does not call it land sale, but it is called income from land transfer. It is collected in the form of rent. The income belongs to the local government. This involves local governments and How does the Central Committee of the Communist Party of China carry out income sharing and benefit distribution?
Mike’s analysis pointed out that although it appears to be an income distribution problem, if you look deeper, you will find that it is no longer sustainable for local finances to rely on land transfer fees. Since the urban housing reform in 1999, the state-owned land transfer fee has continued to rise, and the income for the next few decades will be overdrawn. The land will be sold almost, and the land that can be sold will become less and less in the future. In 2020, when the epidemic is severe, revenue from land transfer fees increased by 15.9%, and in the first four months of this year, this revenue increased by 35% year-on-year. Selling at this rate, in the long run, revenue in this area will peak in the near future.
Mike believes that because it is difficult for the CCP to find growth points to increase government revenue in other economic fields, the CCP must begin to levy property taxes, which may be China’s last card.
In 2016, Founder Securities compiled data from the National Bureau of Statistics of the Communist Party of China. From the beginning of the reform of the urban housing system in 1999 to 2015, the income from state-owned land use transfer fees increased by 63.3 times. In 1999, revenue from the transfer of state-owned land use rights was only 51.4 billion yuan, which reached 4.26 trillion yuan in 2014 and fell to 3.25 trillion yuan in 2015. In the meantime, the proportion of the transfer funds in the local fiscal revenue also rose from 9.2% to 39.2%. According to previous official data calculations, in 2020, land transfer revenue will account for 84% of the local general public budget. @
Editor in charge: Li Wei#
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