Tax Evasion, Capital Gains Taxes, and the Housing Market

吴璟是清华大学建设管理系副教授，入选教育部长江学者青年学者，兼任康奈尔大学中国经济研究中心研究员、中国建筑学会建筑经济分会理事、房地产专业委员会委员。在房地产经济学、城市经济学、金融学领域国际顶尖期刊European Economic Review、Review of Finance、Journal of Real Estate Economics and Finance、Real Estate Economics、Regional Science and Urban Economics等发表学术论文多篇。

In this study, we exploit a policy shock that differentially increased capital gains taxes for some residential property sellers and document tax evasion in the residential resale market in China. Having precise information of the transaction price and the reported price to the tax authority, we show that after the capital gains tax increase, property sellers’ reported price to the tax authority is 15% lower. We also document that the policy has strong heterogeneous effects, whereby wealthy cash buyers are 5.6% more likely to buy a house than buyers who need financing. This is mainly because financing buyers prefer a higher reported price to secure higher bank financing but sellers prefer a lower reported price to evade taxes. This exacerbates wealth inequality in a rising housing market.