Analysis of the Financial Function of the Real Estate Tax

Abstract

By analysing the contribution of real estate taxes to local governments’ tax
revenues in foreign nations, this article concludes that, as Chinese real estate market has
been developing for many years, the existing properties and new properties provide
abundant sources for imposing real estate tax, making it financially feasible to let real estate
taxes play a dominant role in local revenue raising. As the reform on real estate tax involves
an “infringement” of private property rights, when considering the factors in designing the
framework, China not only have to consider the demand of raising revenue by the tax levier
from a macroscopic perspective, but also examine whether a taxpayer is able to afford the
tax financially and accept it politically from a microscopic perspective. Therefore the
reform on real estate taxes should be a gradual process.