How can the muddled account of land transfer fees be clarified? Legislation is imperative
According to media reports, over the past 13 years, the total amount of land transfer fees has accumulated to nearly 20 trillion yuan…… but grassroots officials revealed that exactly how much was collected and how it was used could only be clearly explained by the top leader of the department and the specific person handling it. This has given rise to various irregularities such as embezzlement and misappropriation, cost padding, and off-the-books circulation.
The massive land transfer fees have become a “muddled account.” The fact that the whole country will, for the first time, carry out a large-scale audit of land transfer fees is undoubtedly a good thing. There is a view that the large audit to “take stock of the family assets” is paving the way for fiscal and tax reform; this view makes sense and is also necessary.
When the property tax was first proposed, some people questioned that including in the property tax base the value of land for which land transfer fees had already been paid before housing construction was “double taxation” and unreasonable. Now there is news that the property tax will be rolled out nationwide in the not-too-distant future. In that case, the fiscal and tax system surrounding land transfer fees is not only related to the issue of land transfer fees itself, but also to the reasonableness of the property tax.
Land transfer fees and property tax are two completely different concepts. Land transfer fees exist at the stage of land market transactions and are the land rent collected in a lump sum by the state, in its capacity as the owner of the land, for the right to use the land for 70 years or 50 years. Property tax, by contrast, exists at the stage of holding real estate. If the portion corresponding to land transfer fees is excluded when levying the property tax, then there is no problem of double taxation; if it is not excluded, then it should be called “real estate tax” or “immovable property tax.”
In that case, there are two possibilities for the future of land transfer fees: one is to continue to exist independently, and the other is to be merged into real estate and taxed together. Merging land transfer fees into real estate and taxing them together is the simplest and easiest to implement. In this way, land transfer fees would naturally enter fiscal revenue, and the revenue and expenditure situation would be handled strictly in accordance with the Budget Law and the Final Accounts Law, so it could no longer be a “muddled account.” Moreover, it would also smoothly resolve people's anxiety about what happens after the land use right expires.
However, government officials may not be willing to merge land transfer fees into real estate for taxation. First, merged taxation would become a steady trickle, which is not conducive to advancing “image projects”; second, approval by the people's congress is less convenient than managing it as a local government fund budget; third, the flexible space for irregular operations would be greatly compressed. More importantly, China's cities are still in a period of major development, and objectively there is a need for the platform of land transfer fees to provide convenience for the government to “act.”
In addition, continuing to allow land transfer fees to exist independently not only faces the problems of “managing oneself by oneself,” opaque information, and breeding a large number of irregularities and corruption, but also bears the suspicion of being a driver of high housing prices; a very small number of local governments even find “shills” to drive up land prices. Urban construction, feeding back into water conservancy, construction of affordable housing, replenishing social security funds, returning funds to farmers, developing education…… there are still endless suggestions and controversies over exactly which areas land transfer fees should be used for. Of course, we should believe that the government has the ability to coordinate and reasonably use the funds.
The most important contradiction is that the rent behind land transfer fees has a fixed term and is collected in a lump sum, which has led to the phenomenon of “eating next year's grain this year” that is widespread in China today; the next government often has to rely on demolition and reconstruction to further raise the rent and obtain revenue, which is in fact the root cause of the constantly inflated land transfer prices in China and the persistently high housing prices. It is understood that Western developed countries generally regulate the right to dispose of land transfer fees through legislation, so that each government can only dispose of the rent within its own term, with the remainder set aside in a special account.
Therefore, no matter how the fiscal and tax system surrounding land transfer fees is reformed, the issue of legislation cannot be avoided. Merging them into real estate for taxation together needs to be clarified in relevant legislation on real estate tax; if they continue to exist independently, whether they should be included in unified management of fiscal revenue and how the right to use land transfer fees should be scientifically allocated also need to be clarified through special legislation. It is hoped that with legislation, land transfer fees will no longer be a muddled account.