Finance ministry proposes tax policy to prevent land speculation
Prime Minister Pham Minh Chinh has assigned the Ministry of Finance (MOF) to study and design some kinds of tax related to the real estate market, including property tax, in order to stabilize the market and reduce speculation.
The Prime Minister has issued Decision2161, approving the national housing development strategy in 2021-2030 with a vision towards 2045.
One of the most important goals of the strategy is developing housing products affordable to families with medium and low incomes.
The strategy also sets the goal of making the real estate market sustainable and transparent under the supervision of the State and commensurate with land-use programming. The aim is to ease land speculation which causes waste in land resources use.
Under the strategy, average housing area per capita is expected to reach 28 sq m of floor area per head in urban areas and 26 sq m in rural areas by 2025.
Vietnam aims to increase the proportion of ‘solid’ housing to 85-90 percent by 2030 (100 percent in urban areas and 75-80 percent in rural areas). In addition, 90 percent of houses nationwide would have sufficient electricity and water supply and wastewater drainage systems connecting with public infrastructure.
Regarding the development of commercial housing, Vietnam will encourage multi-storey apartments, friendly to the environment; develop a wide range of housing products for rent and lease-purchase; and increase the proportion of commercial housing with medium-sized areas and reasonable prices.
To implement the strategy, the Government has mentioned measures such as the perfection of the legal framework on housing, planning and land bank development, to solutions on taxation, administrative procedures and investment.
Regarding taxes, preferential tax policies related to the development of social housing projects will continue to be provided to realtors (value added tax, corporate income tax remissions and other preferences).
The Government has also asked to develop new taxes, including property tax, to regulate the real estate market to suit reality and avoid losses to the state budget.
The Prime Minister has asked the Ministry of Commerce (MOC), together with ministries, related branches and provincial authorities, to join forces to implement the strategy.
MOF has been asked to design policies to encourage the diverse development of long-term sources for housing development, such as real estate investment funds, trust funds, real estate corporate bonds, and other long-term financial tools.
The ministry has also been asked to create a property tax to stabilize the market and mitigate speculation, effectively exploit real estate and ensure state benefits.
Prior to that, the HCM City Real Estate Association (HOREA) sent a dispatch to Prime Minister, suggesting very high taxes on the selling and transferring of land and housing right after purchase, with the aim of killing speculation.
The real estate market has witnessed many ‘artificial land fever attacks’ on a large scale since 2017, leading to serious consequences and depriving people of the opportunities to own accommodations. When the fever cools, many individual investors incur big losses, causing social problems.
The real estate association believes that it would be better to impose a progressive tax on people who own many properties and don’t use the real estate for accommodation, production or business. High taxes should also be imposed on institutions and individuals who are late in putting land into use, which will help stop the hoarding of land.
HOREA agrees with MOF’s idea on designing a ‘real estate tax’ on land and house value. Currently, people still don’t have to pay a residential property tax. They only have to pay a tax for use of non-agricultural land, including residential land with a modest tax rate of 0.03 percent.
A representative of MOF said that the ministry is collecting opinions and considering international practice to design new policies for submission to the NA as a part of the taxation system reform strategy in 2021-2030.
Experts have also voiced their support for new additional taxes to help ease speculation which distorts the real estate market.
One of the businesses participating in a bidding session on December 10, 2021 had to pay VND2.4 billion per one square meter to obtain a land plot in Thu Thiem new urban area. The sky high price has raised worries rather than joy.
Concerns about high inflation are causing many people to buy properties to hoard.