House and land tax law in confusion
Lawmakers in the country say it is necessary to change tax collection rules as the 1994 House and Land Tax Law has fallen behind the times. Under the law, residential land, houses, and land for commercial purposes other than cultivation are currently not subject to taxes. As a result, the law fails to make the most from the land for the national budget but does cause property wasting, speculation and an unsound real estate market.
The Finance Ministry in late July submitted to the Government a draft to replace the 1994 law, aiming to raise land tax and impose an extra house tax. Homes hereby will be taxed 0.03% of the value of the house written on building licenses. The taxable threshold is over VND600 million.
Meanwhile, land tax will be based on three different limits and calculated at 0.03%, 0.06% and 0.09% of the value of land. The limits are regulated by relevant departments. Multi-story houses, condos, tenement houses and non-farming land will be subject to a tax rate of 0.03% each year.
The taxes, under the ministry’s viewpoint, will enhance the Government’s management of the real estate market, encourage people to save and effectively invest in land, reduce speculation and help Vietnam reach international standards on house and law regulations. The law will impose suitable taxes on land and house owners, especially those having real assets exceeding the regulated levels.
However, many people say the law will not help reduce speculation with such low tax rates. The law should include high tax rates on vacant land lots, says Nguyen Thi Cam from Dat Luat law firm.
Tran Manh Chau, general director of South Saigon Development Joint Stock Co., suggests the law should have as many detailed tax rates as possible. The Government should impose high taxes on people who own many houses or build luxurious houses. On the contrary, people going to buy their first home, retired people and developers of social housing and resettlement projects should receive tax reductions or exemptions, he adds.
The law should also include specific regulations to calculate house or land prices per square meter instead of laying the calculation on the Government, says Nguyen Minh Phong, head of the economic research department under the Hanoi Socioeconomic Development Research Institute.
Phong says the taxable threshold of VND600 million for houses is not suitable to the situation in Vietnam. The threshold is based on official prices and standard space for four-member families but most households buy homes at higher prices due to brokerage charges.
Phong suggests the ministry increase the threshold by at least twice. Otherwise, the ministry should establish tax rate calculating methods and the Government will calculate detailed rates in each period.
A reader of the Daily says that house tax collection is not appropriate in the current condition. In other countries, only residents with an annual income of US$15,000 are subject to the taxes while nations with developed social security systems only impose the taxes on rental properties. Most Vietnamese have a hard life and receive poor social welfare. The taxes will put more pressure on homebuyers, he explains.
He says the Government should put the tax law on hold and spend more time on research to choose a suitable time for the two taxes.
Some still say that the nation should adjust the land tax and postpone the house tax as the land duties already include use, transfer and registration taxes. The house tax may reduce housing demand in the country, especially the middle-cost segment, says economic expert Huy Nam.
Low and middle-income earners find it hard to pay interest rates over a long time to buy a house, so they meet more difficulties with the taxes. The development of housing and urban infrastructure will slow down as capital inflow to the real estate market is reduced, he adds.
