Seminar Vol. 108

Title: Tax Evasion and the Consequences in the Housing Market

Speaker: Yu Qin, National University of Singapore 

Time: November 5th, 2018 13:30–15:00

Venue: Conference Room 106B, Zhonghui Building

About the speaker:

Yu Qin is an Assistant Professor in the Department of Real Estate at the National University of Singapore. She completed her PhD in applied economics and management at Cornell University in 2014, and started her academic career at NUS the same year. Yu Qin’s research interests include urban and regional economics, economic development and applied econometrics. Specifically, she focuses on the impact of transportation infrastructure on economic activities, urban housing and land market, and urban externalities. Her research has appeared in leading academic journals such as Journal of Economic Geography, World Development, Journal of Population Economics, Regional Science and Urban Economics, Real Estate Economics, and others.

Abstract:

Tax instruments are commonly employed in many different policy contexts including curbing speculations in the housing markets. At the same time, tax evasion is a pervasive phenomenon in the real estate market. In this paper, we document the tax evasion in residential resale market in a major Chinese city. More importantly, we focus on a policy shock that increased capital gain taxes for targeted properties and examine how evasion of such tax may affect the outcome of the policy and generate unintended consequences. We find that market participants increased the amount of tax evasion by 15.2% following the tax increase. Furthermore, our results suggest that the policy has strong heterogeneous effects on different types of buyers and may unintendedly hurt less wealthy buyers in the market by reducing their financing from formal institutions.