Open AccessInternational Real Estate Review
Author(s) -
Charles Ka Yui Leung,
Tin Cheuk Leung,
Kwok Ping Tsang
Publication year - 2015
Publication title -
journal of the asian real estate society
Language(s) - English
Resource type - Journals
ISSN - 1029-6131
DOI - 10.53383/100210
Subject(s) - database transaction , real estate , ad valorem tax , schedule , monetary economics , economics , incentive , business , transaction cost , value added tax , tax reform , microeconomics , finance , public economics , computer science , database , management
We study the implications of a property market transaction tax. As property buyers are obligated to pay a transaction tax ("stamp duty¨ or SD) where the rate increases with the value of the transaction, there are incentives to trade at the cutoff points of the tax schedule or just below them. Thus, both ¡§bunching in transactions¡¨ and ¡§underpricing¡¨ should be observed near those cutoffs. Furthermore, the bunching points should change with the tax schedule. We confirm these conjectures with a rich dataset from the Hong Kong housing market and provide a measure of tax avoidance.