Beijing to collect the transfer of state-owned land local financial “small treasury” will come to an end

China’s Ministry of Finance and other four departments have jointly issued a “notice”, clearly by the natural resources department is responsible for collecting the income from the transfer of state-owned land use rights, mineral resources special income, the use of sea areas, the use of non-resident islands gold four government non-tax revenue, all transferred to the taxation department is responsible for collecting. It means that local governments will lose the “small treasury” as a source of income from land sales.

All revenues from land sales will be transferred to the national taxation department, which will strengthen the central government’s control over local finance. This means that local governments will lose the small treasury of revenue from land sales. This policy at the top of the Communist Party means that local governments will be subject to the central government’s right to use land concessions, which amount to 8 trillion yuan a year.

Ms. Zhou, a businesswoman in Nanjing, Jiangsu province, who is familiar with real estate transactions, said in an interview with the station that the central government’s withdrawal of four non-tax revenues from local governments, including land concessions, indicates that local governments will lose an important source of income.

“There is no doubt that local finances are no longer autonomous. It is said that the land revenue as a small treasury of local finance, the local finance model of making money over the years is to invest and return to the officials’ own pockets. For example, the local government to invest in an industrial park, the investor, for example, is a developer, he must return a proportion of money to the local government.”

Ms. Zhou said that developers as investors often and local government officials agreed on the so-called proportional return of cash to the investment.

“If it is now allocated to the tax bureau for collection and goes to the central government, local officials will be affected in making money. When Xi Jinping took office, his thinking was clear that he would have wanted to take back local revenues.”

Commentary : The financial power strengthens the central government’s totalitarian control over localities

Many Chinese media outlets believe that land concessions have long been an important source of local finance, and that the transfer of income from the transfer of state-owned land use rights, which was originally collected by local natural resources departments, to taxation departments will somehow compress the local government’s dominance over land concessions, making local government finances much less independent and flexible.

The overseas social media channel “Financial Cold Eye” said in this regard.

“In the past, the revenue from land sales has been collected by local governments, without using the tax system, the so-called land finance is a small local treasury, how much to collect, how to use, the central government almost does not know, the key is that this small treasury is also very not ‘small’ last year’s income of 8.4 trillion yuan, their own collection of their own spending, in which the space to move The space is very large. Now the income from land sales is assigned to the tax department to collect, the central government can be said to be directly into the local, from the financial power to strengthen the central government’s total power control over the local.”

According to data from the Ministry of Finance, local general public budget revenue at the local level will be 1,011.24 billion yuan in 2020, and local revenue from the sale of state-owned land use rights will be 8,414.2 billion yuan.

Local governments have greater incentives to carry out forced demolitions

Beijing dissident Jifeng believes that once local governments lose their dominance of land finance, they will think of other ways to gain economic benefits. He told the station.

“The power of local governments will only get smaller and smaller, with mine concessions also paid to the tax bureau and non-tax matters being nationalized. The local government’s money from land sales is paid in, and in the future it will only be able to carry out so-called old city renovations, and there will be more and more forced demolition of houses.”

Scholar Mr. Zhang told the station that the top brass in Beijing is speeding up the nationalization part of large private entrepreneurs in addition to signs that the authorities are also tightening their power over local governments.