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Wealthiest man tells how to rein in rocketing house prices

By Zheng Yangpeng  (China Daily)

14:08, March 22, 2013

Zong Qinghou (File Photo)

The Chinese mainland's richest man has called for the reduction of land prices and the scrapping of taxes and fees tied to real estate transactions, in order to rein in rocketing house prices.

Zong Qinghou, chairman of Hangzhou Wahaha Group Co, the country's largest beverage company, told China Daily that high property prices had become the most disruptive factor in society.

"Based on current house prices and average wages, young working people, especially in large cities, would never be able to afford to buy their own home," Zong said.

He suggested land sale revenues should not be used as fiscal revenue by local governments, which would rein in their urge for relentless urbanization.

China's local governments, which acquire land at the acquisition price and sell it at the market price, have come to rely heavily on land acquisition as a revenue earner to finance the delivery of public services, especially infrastructure, according to a World Bank report.

Zong proposed the elimination of taxes and fees related to real estate transactions, which he said account for half the cost of a house.

Of the 18 types of taxes levied in China, 10 are related to the land and property market.

Five kinds of taxes levied on the property market contributed 1 trillion yuan ($160 billion) to governments in China in 2012, up from 90 billion yuan in 2003, an increase of more than 1,000 percent.

Citing a senior executive of realty developer Shanghai Pengxin Group Co Ltd, Beijing-based newspaper China Times reported that the taxes and fees collected by governments accounted for 20 to 30 percent of house prices.

Combined with a 30 percent land transfer fee, local governments could collect at least 1 million yuan from a 2 million yuan house.

Zong's vision even includes a bold measure to ensure more city dwellers have the right to public housing.

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