On the Legal-Theoretical Foundations of Property Taxation under State Ownership of Land

The general public and even some scholars challenge the legitimacy of levying the property tax under conditions where land is state-owned and multi-year land-use fees have already been collected at the time of house sales. This challenge points to the legal- theoretical foundations of property taxation: the core issue is whether the rights and economic utility of China's construction land-use-rights (CLUR) are sufficient to be treated as the object of property tax levy. China's Civil Law stipulates that CLUR holders have the rights to possess, use, and profit from the land during their use period, as well as the right to transfer the use rights; they can establish mortgages and easements, making them the ultimate beneficiaries of property value. Therefore, China's CLUR function as "ownership rights" and represent a special form of ownership. Even if CLUR are recognized only as a type of superficies, from the perspective of comparative tax systems, long-term superficies should be taxed as land ownership; otherwise, superficies holders would consume public services for extended periods but pay little taxes, which violates the principle of benefit taxation and creates local fiscal traps. Therefore, property taxation has sufficient legal-theoretical foundations in China's legal system. After its adoption, the property tax should coexist with land-use-right transfer fees, as they cannot substitute for each other; as for how to account for the portion of property tax that may have been included in land transfer fees already paid under the current system, this should be clarified in tax design through appropriate arrangements. Similarly, the property tax and land-use-right renewal fees cannot substitute for each other, with the latter more reasonably levied as an "annual rent."