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Center for Policy Research

Property Tax Web Series

Tax Streams, Land Rents, and Urban Land Allocation

Yugang Tang, Zhihao Su, Yilin Hou, and Zhendong Yin

November 2024

Abstract

This study examines the fiscal motives behind the allocation of land in Chinese cities by municipal governments for commercial and residential use. We focus on the effects of business taxation and land value-based charges on the allocation of land for the two uses. With the universe of land transfer data, we spatially match commercial parcels with residential parcels and uncover significant price discounts for commercial parcels due to their expected tax flows. A stylized structural estimation reveals that while prospective taxes encourage commercial land supply, market price responses and corresponding land value-based charges notably counteract this effect. These results highlight a self-regulatory mechanism in the land market, balancing the fiscal influences of business taxation and land value-based charges.

This paper was presented by Yilin Hou (Syracuse University) on November 22, 2024 as part of the 2024-2025 Syracuse-Chicago Webinar Series on Property Tax Administration and Design. Xiaozhou Ding (South Dakota State University) was the discussant for this presentation.

This Syracuse-Chicago Webinar Series on Property Tax Administration and Design aims to gather insight and scholarship through domestic and international comparative studies with common threads to help reform and improve property tax administration and design in the U.S. and other countries facing similar problems.

For questions about the webinars, please contact Heidi Perry. For questions about this paper, please contact the author or authors.

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