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May 22, 2018 / 08:13

Property tax plan postponed at least until 2020

Tax on houses valued at more than VND700 million (US$30,800) will not be applied at least in the next two years as the property tax law is still being studied, Nguyen Van Phung, director of the General Department of Taxation’s large-sized enterprises division, said.

According to Phung, the property tax proposed by the Ministry of Finance is causing widespread public concern. The tax is applicable in many other countries but Vietnam needs more time to mull such a tax law. It is important to work out a reasonable tax rate and a taxable threshold.
 
The proposal of property tax has raised strong public opposition
The proposal of property tax has raised strong public opposition
Last month, the ministry announced a draft law on the property tax. The proposal has raised strong public opposition as it would directly hit the poor if enacted.
Under the proposed law, there are two options: imposing tax on houses with construction value of either more than VND700 million ($30,800) or VND1 billion ($44,000). The proposed tax rate is 0.3 or 0.4 percent annually, with only the surplus construction value above the proposed threshold to be taxed. The construction value of a house is determined by factors including its type, scale and how many years it has been in use since construction.
The ministry currently favors taxing houses worth more than VND700 million at a rate of 0.4 percent.
The draft law on property tax also proposes tax on personal vehicles such as planes, yachts and cars worth more than VND1.5 billion (US$65,000).
Truong Thanh Duc, chairman of the BASICO Law Firm, said a property tax law is necessary, however, “people’s incomes must be taken into consideration when studying the law enforcement,” he said.
Dang Hung Vo, former Deputy Minister of Environment and Natural Resources, agreed with the land tax hike by ten times, saying that housing land tax of 0.4 percent, 0.5 percent-tax on business, trade and service land are reasonable. In the future, it could be increased to 0.7 to 1 percent.
If land tax is high, land prices will fall, while if the tax is low, speculative hoarding might happen. If the tax is high, anyone who wants to buy land must consider whether they can afford the tax or not, he said.
However, he opposed the housing property tax proposal, adding that developed countries impose housing tax depending on house area (not on value).
Finance and banking specialist Nguyen Tri Hieu said imposing tax on land and houses is crucial to create equality in owning properties. However, the property tax law should require land tax only.
“People already pay personal income tax. There will be overlapping taxes if we require people to pay tax on the money they use to buy a house,” he said.
Le Hoang Chau, President of Ho Chi Minh City Real Estate Association, said if the law takes effect, the real estate market will be impacted, slowing business and investment activities.
Disagreeing with the proposal, the Ho Chi Minh City Real Estate Association proposed no tax on houses worth less than VND1 billion to support low-income and low middle-income people.
Chau also proposed a 0.4 percent-tax on housing land, apartment building land and houses worth more than VND1 billion.