Local gov'ts increasingly dependent on land-use charges

17:18, December 27, 2010      

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Local governments in China being increasingly dependent on land-use fees for revenue has caused social problems, including rapid increases in housing prices, the official newspaper of the Communist Party of China (CPC) reported Monday.

In 2009, local governments collected 1.5 trillion yuan ($226.2 billion) in land-leasing fees, some 46 percent of all local government revenue, according to the report.

In some counties and cities, land-leasing fees provided up to 80 percent of revenue.

With more publicly-owned land available for development, local governments will likely collect around 2 trillion yuan in land-leasing fees in 2010.

After leasing land for development, local government may also levy taxes on the building industry and real estate developers, the newspaper quoted Huang Xiaohu, vice-president of China Land Science Society, as saying.

They can also levy others charges, including land acquisition and land-use planning fees.

The governments collect even more if they mortgage their land for bank loans, Ye Jianping, professor of the Department of Land and Real Estate Management at Renmin University of China, told the newspaper.

Over-dependence on "land revenue" is harmful, the report said, because it leads to illegal land acquisition and soaring house prices.

Local governments are the largest stakeholder in the land-use market, and so, to secure their income, they are likely to use policy to stop house prices from falling, said Zou Xiaoyun, deputy chief engineer of the China Land Surveying and Planning Institute.

Emphasis on land-use revenue has promoted speculation in the real estate market, Ye said, adding that land mortgage loans have increased risk for the financial sector.

Land is finite, so relying on land use charges for revenue is not sustainable in the long term, Zou said.

Over the next five years, China will streamline the local-central government fiscal revenue system, to reduce local governments' reliance on land-use charges, said Jia Kang, director of the Ministry of Finance's Institute of Fiscal Science Research.

Premier Wen Jiabao pledged the government will enhance housing-price control measures during a China National Radio broadcast Sunday.

Source: Xinhua
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