The State Council on May 31 approved a national program to gradually push forward property tax reform, a signal that the long-debated tax may be already in the pipeline.

China has been running simulation programs since 2003 to prepare for the ad valorem tax, which would replace current levies based on property transactions.

There are reports that Shanghai will be the first to launch the reform, possibly imposing the tax on people with residential areas exceeding 70 square meters each, or a household with more than 200 square meters of living space.

Other details are unclear about the tax, but a report by the Australia and New Zealand Banking Group Ltd. (ANZ) estimated that it may generate 120 billion yuan ($17.6 billion) in revenues annually for the governments.

The tax may be 0.8 percent of the market value of properties and be levied on people with multiple homes, beginning with their second home, said Liu Ligang, an ANZ economist.

Chen Guoqiang, Director of the Real Estate Institute under Peking University, said the tax would deal a heavy blow to speculators, believed to be the culprits for sky-high home prices.

It will also deliver a boost to the fiscal income of local governments and wean their reliance on land sales, said Chen.

Ni Hong, a senior researcher with the Development Research Center of the State Council, agreed. "It is also a long-needed boon for bridging the widening income gap and ensuring economic health."

But China still has a long way to go before really collecting the tax as the government would have to decide whether to levy taxes on a per-person or per-family basis, as well as dealing with housing size and value, said Ni.