Tax benefits and burden reduction add vitality at the right time, Securities Times: Real estate tax legislation suspended tax law | planning | burden reduction

Recently, the Legislative Plan of the 14th Standing Committee of the National People's Congress was announced to the public. In the field of finance and taxation, the Plan specifies that value-added tax law, consumption tax law, tariff law, etc. will be submitted for review during the term of the Standing Committee of the People's Congress of this year; However, the highly anticipated legislation on real estate tax and the revision of personal income tax law did not appear in this legislative plan.

Several experts in the field of finance and taxation pointed out in an interview with Securities Times reporters that the "Plan" clearly accelerates the legislation of value-added tax, consumption tax, and tariffs, and the relevant processes are expected to be passed during the term of this session of the Standing Committee of the People's Congress. If the legislation on real estate tax is temporarily suspended, more consideration should be given to the domestic economic situation, and any measures to increase the burden should be taken with extra caution at this time; But in the long run, the legislative direction of the above-mentioned taxes has not changed, and may steadily advance when conditions are ripe. It is worth mentioning that since the adjustment of special additional deductions does not require revision of the law, there is still a possibility of further reducing the tax burden on residents through means such as expanding the scope of special additional deductions and raising standards.

Reducing personal tax burden, there is still a possibility of increasing it

Personal income tax directly affects the income of residents, and the revision of relevant laws has attracted much attention. The previous round of revision of the Personal Income Tax Law was approved by the National People's Congress in 2018, raising the threshold for personal income tax to 5000 yuan per month; Introduce special additional deductions such as child education, elderly care, and housing loan interest; And for the first time, the four categories of income, including wages, salaries, and labor remuneration, were unified and merged into comprehensive income, using a unified seven tiered progressive tax rate.

Subsequently, the Ministry of Finance has repeatedly proposed to timely promote the reform and amendment of personal income tax, reasonably expand the scope of income included in comprehensive taxation, improve special additional deduction items, and optimize the tax rate structure.

"The revision of the Personal Income Tax Law did not appear in the 'Plan', which also means that the relevant tax system and tax rates may not be adjusted in the short term," Sun Kunpeng, Associate Professor of the School of Finance and Taxation at Central University of Finance and Economics, told reporters. In the long run, establishing a modern tax system and enhancing the role of personal income tax in regulating income distribution remains an important direction for personal income tax reform. When conditions are ripe, relevant legislative work may steadily advance.

Sun Kunpeng pointed out that in recent times, the government has extended policies such as separate tax incentives for year-end bonuses and individual income tax incentives in the capital market until the end of 2027, and raised the three special additional deductions for individual income tax for "one elderly and one small", fully releasing the signal that the country can effectively reduce the burden of people's lives and boost consumption.

Tian Zhiwei, Vice Dean of the Institute of Public Policy and Governance at Shanghai University of Finance and Economics, also told reporters that since the adjustment of special additional deductions does not require amending the law, there is still a possibility of further optimizing personal income tax through measures such as expanding the scope of special additional deductions and raising standards in the future.

Real estate tax legislation suspended

At the beginning of this year, former Minister of Finance Lou Jiwei published an article titled "Reform and Future Prospects of China's Financial System in the New Era", pointing out that real estate tax is the most suitable tax type as a local tax, and pilot projects should be launched as soon as the economy transitions to normal growth. For a while, discussions about the upcoming real estate tax were raging.

In 2013, the Third Plenary Session of the 18th Central Committee of the Communist Party of China proposed for the first time to accelerate the legislation of real estate tax and timely promote reform. In the Legislative Plan of the Standing Committee of the 13th National People's Congress, the real estate tax law was included in the first category of projects, which is a relatively mature legal draft that is intended to be submitted for review during the term of office. However, during the term of the Standing Committee of the 13th National People's Congress, the real estate tax law was not submitted for review, and in this legislative plan, the real estate tax was not even mentioned again.

Professor Li Rong from the School of Finance and Economics at Renmin University of China believes that due to the high proportion of real estate in the wealth of Chinese residents, it is relatively more sensitive. Meanwhile, in recent years, the supply and demand relationship in China's real estate market has undergone significant changes, shifting from preventing overheating to preventing overcooling. At this time, the hasty implementation of real estate tax will have adverse effects on China's real estate market and even economic development.

Sun Kunpeng pointed out that the legislation of real estate tax needs to be comprehensively considered, and releasing policy signals related to real estate tax to the outside world requires high caution. Considering the current economic situation, it is necessary to postpone the legislation on real estate tax. Of course, the absence of real estate tax legislation in the "Plan" does not mean giving up legislation. In the long run, the direction of real estate tax legislation and the establishment and improvement of local tax systems has not changed, and it is not ruled out that relevant legislative work will continue to be promoted when conditions are ripe.

Tian Zhiwei believes that even if real estate tax legislation is timely promoted in the future, attention should be paid to the methods and techniques of taxation. We can consider piloting the real estate tax from the incremental part instead of reforming the existing market in one step. "For example, first imposing real estate tax on newly purchased first-hand housing; then imposing real estate tax on second-hand housing for transfer transactions; and exempting tax on existing housing. This reduces the impact of real estate tax on the market and gradually solves the problem of real estate tax through time accumulation," he pointed out.

Accelerated legislative process for value-added tax, consumption tax, and other related taxes

The value-added tax law, consumption tax law, and tariff law are listed as the first category of taxes in the Plan.

Sun Kunpeng stated that this means that the legislative preparations for relevant taxes have been relatively sufficient and are expected to be passed during the term of the Standing Committee of the National People's Congress. Among them, the second review draft of the value-added tax law is currently being publicly solicited for comments, and further revisions may be made based on feedback. However, overall, the introduction of the value-added tax law in the short term has a strong practical possibility.

In terms of consumption tax law, the Provisional Regulations on Consumption Tax were promulgated and implemented in 1993, and have undergone multiple revisions and reforms since then. "After nearly 30 years of practice, the Provisional Regulations on Consumption Tax have met the mature conditions for upgrading from a regulation to a law." Li Rong believes.

Li Rong pointed out that tax legislation is a cautious and slow process, especially for larger tax categories, which require steady progress. Generally speaking, it takes several years from deliberation to legislation, and value-added tax law, consumption tax law, and tariff law are not expected to be introduced this year. At the same time, the legislation of the three major tax categories mentioned above is basically a translational tax system, which will not have a significant impact on the operation of China's economy.

At the same time, the revision of the Budget Law has been included in the second category of the Plan, which is a draft law that requires urgent work and is submitted for review when conditions are ripe. Li Rong stated that improving the modern budget system is a necessary path to deepen the reform of the financial and tax system. At present, there is still some room for reform in areas such as comprehensive budget management, collaborative management of budget performance, and prevention and resolution of fiscal risks.

In addition, the Plan will include the regulation of fiscal and tax systems such as non tax revenue, government debt, and transfer payments in the third category of projects, which require further research and argumentation as the legislative conditions are not fully met.

In Sun Kunpeng's view, the above-mentioned projects have a wide range of contents and involve a wide range of areas, and the relevant financial and tax practices have shown strong local characteristics. In legislative work, it is necessary to consider both national commonalities and local characteristics, and the preparation of legislative details is not yet fully mature; In addition, issues related to local bonds and transfer payments also require a comprehensive consideration of the macro environment such as economic risk prevention. Therefore, they are classified as the third category and will be further studied and demonstrated in the future.