Chinese Economics Thread

[Gatekeeper]

What lawyers? When I register where I live I don't use a lawyer I tell my local council, in China you usually register at a Police station, I need to be in my property for 6 months prior to selling it for it to be my abode to avoid capital gains its not a hypothetical! You can mess around with the duration but property is not a liquid asset class people don't expect to buy and sell it on a whim!

The government will know where you live and what you own but in your dystopian China, people aren't allowed to live where they please? you can't move around? If you happen to acquire multiple properties prior to the law change you'll be stuck in the one you currently live in? Doesn't seem 'simple' to me

But hey keep defending that hill with the flag you planted on it!

As a chartered accountant. I must take issue with your understanding (lack of) capital gains tax law.

I take it you're talking about the U.K. tax law, and you lived in the U.K.. in the U.K. it is a requirement that upon selling your property, you have to declare capital gains tax due. It's true that you can select which ever property to be your main residence to avoid capital gains tax. But in so doing, all your other properties would then automatically become a liabilities for future capital gains upon sales of those properties.

Each residence are entitled to ONE main residence only. So you do not escape capital gains tax on other properties. You can select which property is your main residence. But you must have utilities bills and council tax in your name.

And lawyers and accountants would be needed to confirm this. Although like all things you can do it yourself. But most of us don't have the skills, particularly in conveyancing. So There's always records for the tax authority to check if they want to.

I know other people have tried and got away with it by declaring more than one main residence. But you're committing a crime!

 

[sndef888]

China, Taiwan, Japan and Korea had very similar growth trajectories in GDP per capita from around $1000 to $11000

Japan went from 1058 in 1966 to 11584 in 1985 (19 years)
Taiwan went from 1158 in 1976 to 11242 in 1993 (17 years)
South Korea went from 1055 in 1977 to 11561 in 2001 (24 years, a little slower due to 1997 crash)
China went from 1053 in 2001 to 11819 in 2021 (20 years)

What's incredible is the fact that China is like 5 times larger than the rest of them combined

 

[krautmeister]

- restrict ownership to 1 property per person
- build millions of apartments in existing and new cities
- restrict companies ownership of single family homes
- converts city center offices to apartments and people can work from home instead (saves carbon)

I don’t see what a property tax does to help the situation apart from raising revenue, is there any example of its implementation having worked to reduce prices?

All good recommendations. Should point out that a property tax is considered as carrying cost when calculating how large of a mortgage loan can be borrowed. Typical property tax rates in North America are typically between 0.5%-2% of the property assessment value, paid annually. When you do the calculations, a similar property tax rate in China would reduce mortgage borrowing power by an average of around 10%-20%. So, a property tax would have an immediate and negative effect on the real estate market. It would be devastating at such a tax level, if it was ever implemented, I think the tax rate would be much lower and probably phased in with a progressively increasing tax rate over a few years. This would accomplish more to halt or at least dramatically slow down price increases than all other measures combined.

Imo, a better idea would be to raise the real estate transfer tax to something between 2%-10% depending on the type of property it is. Specifically, have the transfer tax at a higher 10% for more luxury properties and lower for typical cookie cutter apartments. Also have the transfer tax double, triple or quadruple if the buyers already have 1 property. Then have a low property tax relative to the West, and raise it accordingly as the situation deems necessary. Charging a high transfer tax would incentivize holding property longer term while being scaring away speculators.

 

[hkbc]

As a chartered accountant. I must take issue with your understanding (lack of) capital gains tax law.

I take it you're talking about the U.K. tax law, and you lived in the U.K.. in the U.K. it is a requirement that upon selling your property, you have to declare capital gains tax due. It's true that you can select which ever property to be your main residence to avoid capital gains tax. But in so doing, all your other properties would then automatically become a liabilities for future capital gains upon sales of those properties.

Each residence are entitled to ONE main residence only. So you do not escape capital gains tax on other properties. You can select which property is your main residence. But you must have utilities bills and council tax in your name.

And lawyers and accountants would be needed to confirm this. Although like all things you can do it yourself. But most of us don't have the skills, particularly in conveyancing. So There's always records for the tax authority to check if they want to.

I know other people have tried and got away with it by declaring more than one main residence. But you're committing a crime!

I have 2 properties if I want to sell the one I am not currently living in, I'll pay cap gains, if I want to avoid it, I need to move into it and live there. At which point after I sell it I need somewhere to live, I can buy another property or move back into the other one I already own! In the interim I'll need to either rent out the other house and pay income tax on the rent or leave it empty and be stung for council tax which will got up the longer its left empty

Its not industrial scale and I not advocating anything criminal by declaring multiple residences

 

[Gatekeeper]

I have 2 properties if I want to sell the one I am not currently living in, I'll pay cap gains, if I want to avoid it, I need to move into it and live there. At which point after I sell it I need somewhere to live, I can buy another property or move back into the other one I already own! In the interim I'll need to either rent out the other house and pay income tax on the rent or leave it empty and be stung for council tax which will got up the longer its left empty

Its not industrial scale and I not advocating anything criminal by declaring multiple residences

In a word. No!

By moving in for six months only prove that you're entitled to name that property as your main residence. Because this would entail you to pay council tax and utilities bills as I've mentioned in my previous reply.

But it doesn't necessary exempt you from all the capital gains tax liabilities unless you declared you have lived there all the time. And when you do that, you other property is liable to all capital gains tax. If you say you only lived there for say 5 years then ONLY that 5 years are exempt from capital gains tax. But the remainder of the time you've owned the property is still liable to capital gains tax.

And the other property can be exempt from capital gains tax LESS the 5 years
That has been used up by this property.

We accountants will work it out for you. I feel I'm offering my services for free here lol.

 

[hkbc]

In a word. No!

By moving in for six months only prove that you're entitled to name that property as your main residence. Because this would entail you to pay council tax and utilities bills as I've mentioned in my previous reply.

But it doesn't necessary exempt you from all the capital gains tax liabilities unless you declared you have lived there all the time. And when you do that, you other property is liable to all capital gains tax. If you say you only lived there for say 5 years then ONLY that 5 years are exempt from capital gains tax. But the remainder of the time you've owned the property is still liable to capital gains tax.

And the other property can be exempt from capital gains tax LESS the 5 years
That has been used up by this property.

We accountants will work it out for you. I feel I'm offering my services for free here lol.

Well thanks for the free tax advice

Don't want to 跌落地揦返拃沙 but you've kind of made my point for me, slapping some cap gains tax as a remedy is far from 'simple' but I guess it will create lots of job opportunities for accountants and solicitors there's always a silver lining

 

[gadgetcool5]

China, Taiwan, Japan and Korea had very similar growth trajectories in GDP per capita from around $1000 to $11000

Japan went from 1058 in 1966 to 11584 in 1985 (19 years)
Taiwan went from 1158 in 1976 to 11242 in 1993 (17 years)
South Korea went from 1055 in 1977 to 11561 in 2001 (24 years, a little slower due to 1997 crash)
China went from 1053 in 2001 to 11819 in 2021 (20 years)

What's incredible is the fact that China is like 5 times larger than the rest of them combined

That's misleading because $1 in 1985 is not the same as $1 today. When Japan reached 11584 in 1985, US per capita GDP was only 18200. Now its 63500. You need to use purchasing power (PPP) and adjust for inflation.

In other words, China is at 18.6% per capita of what the US is today, a level Japan was at in 1961. For the rest of the 1960s, Japanese economic growth averaged about 10% per annum.

 

[AndrewS]

Well thanks for the free tax advice

Don't want to 跌落地揦返拃沙 but you've kind of made my point for me, slapping some cap gains tax as a remedy is far from 'simple' but I guess it will create lots of job opportunities for accountants and solicitors there's always a silver lining

Solicitors are usually involved in property purchases.

When there isn't one, banks who lend money get suspicious.
And there's all sorts of things that could trip up a buyer or seller if the legals aren't done correctly.

Companies are automatically charged higher taxes for property purchases.

And if you're talking about loopholes, it takes time to develop them and their use to spread.

 

[sinophilia]

China, Taiwan, Japan and Korea had very similar growth trajectories in GDP per capita from around $1000 to $11000

Japan went from 1058 in 1966 to 11584 in 1985 (19 years)
Taiwan went from 1158 in 1976 to 11242 in 1993 (17 years)
South Korea went from 1055 in 1977 to 11561 in 2001 (24 years, a little slower due to 1997 crash)
China went from 1053 in 2001 to 11819 in 2021 (20 years)

What's incredible is the fact that China is like 5 times larger than the rest of them combined

Yes but growth from here on out was very fast for those other countries right?

How many years did it take for them to go from $11,000 to $22,000?

Better yet, seen as a % of the US (or EU), how long did it take for them to go from 15% of US to roughly 40% of US.

 

[FriedRiceNSpice]

Yes but growth from here on out was very fast for those other countries right?

How many years did it take for them to go from $11,000 to $22,000?

Better yet, seen as a % of the US (or EU), how long did it take for them to go from 15% of US to roughly 40% of US.

South Korea tripled its GDP per capita from 11,000 in 2001 to 32,000 in 2021. So as a minimum floor, we can expect Chinese GDP per capita to triple by 2041.