Why the Real Property Tax? A Fiscal System’s Approach

Abstract

This chapter starts with a fiscal system’s approach to taxation and explains why the real property tax should be an inherent part of a tax system. Then it reviews the evolution of taxation in China before and after 1949 as a contrast and describes China’s financial reforms since 1978 as forerunners of subsequent socio-economic reforms. It depicts adopting the real property tax as a reshuffling of China’s current intergovernmental fiscal relations, not merely the introduction of a new tax. To vividly describe the challenges China faces in adopting the real property tax, it uses an analogy of the “window paper effect,” with the connotation that though the window paper is sturdy enough to resist winds, once the paper is broken purposely or a crack occurs, the removal of the whole window paper takes no huge efforts. This analogy of resistance losing steam will be used as a hidden line throughout the book as our expectation for future development.