Real estate firms owe $623.58 bln in tax: report

China Central Television (CCTV) reported Sunday that major real estate companies are behind on payments of land value-added tax (VAT) amounting to more than 3.8 trillion yuan ($623.58 billion) for the period between 2005 and 2012.

China's real estate companies should have paid a total of 4.6 trillion yuan in land value-added taxes between 2005 and 2012 but only paid 0.8 trillion yuan, CCTV reported, citing Li Jinsong, a Beijing lawyer and certified tax agent.

The figures were calculated by Li based on data from the National Bureau of Statistics, Ministry of Finance and State Administration of Taxation (SAT). the report said.

A total of 45 major listed real estate companies in the country, including Agile Property Holdings Ltd, SOHO China and China Vanke Co, are among the companies that are behind on payments, according to the report.

Agile Property Holdings Ltd owes the most, being 8.3 billion yuan in arrears, with SOHO China second on the list at 6.4 billion yuan, and China Vanke Co third at 5.8 billion yuan, the report said.

Part of the function of the land value-added tax is to curb excessive profits reaped by real estate companies. But not only have these companies failed to pay the tax they owe, they are still earning interest on the money they should have paid, the official microblog of People's Daily commented Sunday.

No wonder the real estate developers are rich, it said.

Ren Zhiqiang, chairman of Huayuan Property Co, which reportedly owes 540 million yuan in tax, commented Sunday on his microblog that the CCTV report was misleading.

Part of the land value-added tax must be prepaid at the time of land presale, and the remaining tax can be settled according to the project's progress, Ren explained.

Real estate companies do not have to pay the land value-added tax if they have not met the settlement conditions that are prescribed by the taxation law, Ren said.

But Li Jinsong said on his Weibo that Ren's comments show his ignorance of the tax situation.

The SAT and relevant government bodies have yet to respond to the CCTV report. Pan Shiyi, chairman of SOHO China, has also not yet commented on the report.

"The figures mentioned in the CCTV report might not be correct because collection of land value-added tax is very complicated," Chen Guoqiang, deputy head of the China Real Estate Society, told the Global Times Sunday.

"Land value-added tax is not paid in a lump sum but according to the project's progress. For some projects, the tax will be paid off only after they are completed," Chen said.

Following the CCTV report, some market watchers expressed their anger and said the non-payment of tax was a problem that has been known about for a long time.

Various reforms planned

China's property market reform is not simply about extending the property tax to more cities but will include comprehensive reform measures, Chinese officials said over the weekend.

Speaking at a seminar in Beijing Saturday, three Chinese officials said they have no knowledge about extension of the property tax beyond the pilot cities of Shanghai and Chongqing, Beijing Times reported Sunday, without giving the names of the officials.

The decisions made at the recent Third Plenary Session of the 18th Communist Party of China Central Committee showed that it will be a series of related reforms rather than simply focusing on the property tax, an unnamed official from the Legislative Affairs Office of the State Council was quoted by the report as saying.

China released on November 15 the full text of the decisions made at the plenum.

Chen Guoqiang, deputy head of the China Real Estate Society, told the Global Times Sunday that the property tax mentioned in the document will probably include taxation of land transfer, development and circulation.