I began playing politics in California in 1960 when I got involved in the movement to draft Adlai Stevenson as the 1960 Democratic Party presidential nominee. I have continued having political interests, albeit on a more international basis, after moving to the other side of the Pacific in 1990. I thrived on information gathered during visits to Washington, Sacramento, or Los Angeles in the past. Now I’m close to the source of political policy in Beijing and Guangzhou, and in Bangkok, Singapore, and Delhi as well, cities where there is tremendous power being wielded by brokers who do not want to be represented in the press. I respect their wishes, but it is hard to believe that I’ve been here long enough to witness these individuals rise to positions of power.

These movers and shakers are concerned about inflation — scared out of their minds is more like it. They want to curb speculation, but they worry about how to do it. On August 17 the central government in Beijing announced policy directives, effective immediately, requiring provincial governments to report progress in curbing rising home prices. Taxing short-term sales has a lot to do with cooling off the market. The government will start with the major cities first. According to an August 18 article in the Beijing edition of the China Daily, the central government is preparing a list of additional cities where home purchasing restrictions will be imposed.

Currently, 40 cities throughout the country have new tax duties based on gross selling price, for sales under two years. It is projected that an additional 30 cities will come under this policy, which will definitely affect the housing market and rising prices — if the tax is high enough to be a deterrent. If it is not sufficiently punitive, the real estate speculation frenzy will continue.
 
I believe this is a prelude to a property tax system, as well as the development of both bureaucracies and ancillary private businesses to support it. Some type of property tax must be instituted as cities and townships run out of land to sell, because land sales are the overwhelming revenue producers throughout the country.
 
How well additional cities will fare is open to conjecture as long as dual contracts, which I have mentioned in previous articles, are prevalent. The true stamp tax/capital gains tax from short-term holding of property will never be known, as long as there is no verification process to determine whether the contract prices submitted to the government are realistic. I see this as a definite area of bureaucratic abuse — especially the further removed from the central government you are.
 
 On August 12 a new interpretation of China’s Marriage Law by the Supreme People’s Court stated that a spouse has no share of ownership of property bought in mortgage by the other spouse before marriage. Under this interpretation, work in the home by the spouse would not entitle him or her to any compensation in property in the event of divorce. Under prior interpretations of the law, a house purchased before marriage is jointly owned by both spouses after marriage, regardless of who paid for the property. Consequently, this new interpretation is going to create some controversy.
 
Many view this as just another effort to curb housing prices. There are jokes about parents driving up real estate prices in the first-tier cities by demanding that the couple have its own home before consenting to their daughter’s marriage.
 
No, it won’t stop prices from rising. It will create a growing number of legal specialists in divorce litigation because of the high incidence of divorce that China is now experiencing. I expect an awful lot of tax-evaded transactions to show up as disputed assets in Chinese divorce court. I wonder if the State Administration of Taxation (SAT) will assign someone to monitor these cases.
 
Tax enforcement is obviously necessary to price stability. It is not going to happen overnight. Both property taxes and capital gains taxes are law. Yet until all sales contracts are recorded and verifiable, making that true sales price subject to tax, it simply won’t be a deterrent.
 
 We’ve just discussed the national handling of spousal ownership. The localities are now chiming in.
 
The August 30 issue of China Daily cites Nanjing’s take on the matter. On August 23, 11 days after the central government reclassified its views of property ownership, Nanjing’s municipal tax authorities announced that a 3 percent tax will be imposed on couples who add the second name to ownership documentation. That tax is based on the evaluated price of the transferee’s share of the property that applies only to the portion of a property belonging to the partner who is not named on the original ownership papers. From what I am told, Nanjing’s chat rooms were nearly universal in calling this ‘‘looting.’’ There was so much commentary that on August 24, Nanjing’s local tax bureau stated that the introduction of the tax would be delayed until the completion of further studies. Those studies were fast and furious. On August 25, the tax was given the go-ahead without any further explanation. Perhaps it is because the cities of Chengdu and Qingdao already have a similar tax and Wuhan has one at 4 percent. Meanwhile, the SAT stayed out of the fray, stating that it was solely a decision for local authorities. In fact, it issued a September 1 bulletin stating unequivocally that there will be no tax for adding a spouse’s name to the property owner’s certificate.
 
I think it was much ado about nothing. True, this could very well spur the development of a real estate appraisal business throughout the country. But if the new spouse enters with nothing — or next to nothing — it will cost more to process the paperwork than the 3 or 4 percent tax on ‘‘next to nothing.’’ Shanghai might be doing this the right way — it will simply add the new spouse for a CNY 100 fee. Also, perceived meanings have much to do with crises of public confidence. Calling this a tax was a screw up by the respective governments — they should have called it a fee!
A new tax law took effect in China on September 1. All the Chinese newspapers had articles extolling the virtues of the new law, which increased the monthly exemption from CNY 2,000 to CNY 3,500, effectively taking 60 million people off the tax rolls and dropping the number of Chinese (and non-Chinese people like me) who fall under the tax umbrella to 24 million. The monthly savings for those earning CNY 3,500 per month will be CNY 125. That would be substantial were it not for inflation affecting all basic costs that low-wage earners must cover to exist. A Chinese ‘‘salaryman’’ who earns CNY 10,000 a month will now save CNY 480 per month. That, too, is being eaten away by inflation. The exemption is projected to decrease tax collections by CNY 160 billion. Where will the government make up the shortfall?
 There will be 24 million people subject to taxation in a country with a population of 1.3 billion. That tells me two things: The tax umbrella will eventually increase in size, as incomes increase in the country, and the SAT will begin to emphasize more productive means of raising revenue.