VietNamNet Bridge - Last week, the Vietnam Chamber of Commerce and Industry (VCCI) held a conference drawing the participation of over 200 companies in northern cities and provinces, with an aim to solve difficulties related to the Government’s Decree 121 on land and water surface rental adjustments.

In fact, it was a meeting among businesses and leaders of the Ministry of Finance’s taxation agency, and the Ministry of Natural Resources and Environment’s counseling agency for the Government to issue Decree 121. An official of VCCI told the Saigon Times that the State’s land rentals are so “hot” that the business community cannot wait any longer.

Nguyen Thanh Canh, chairman of the Association of Small- and Medium-Sized Enterprises in Ha Long City (Quang Ninh Province) explained that the reasons for this urgency involves the changing of the land rental policy following Decree 121 issued on December 30 last year and valid since March 1 this year.

In the decree, land rentals are set close to land-use right transfer prices in the market under normal conditions (where the rentals are 1.5-3% of the transferring prices). Previously, Decree 142/2005 set the land rentals for businesses in accordance with the land prices announced annually by the people’s committees in the cities and provinces, from 0.5-2%.

“In 2011, land rentals increase by 1.5-5 times compared to those in 2006,” Canh said. “The ratios used to set the unit price of land rentals in the province this year were adjusted up 0.5-1.5%, three times higher than those in 2006. Over the past five years, it is unreasonable for the land rentals to rise by 4.5-15 times.”

To Ngoc Thach, chairman cum general director of Hong An Equipment Company, brought along the land rental agreement and notice for payment of land rent, and gave them to Deputy Minister of Finance DoHoang Anh Tuan. On March 15, his company received the notice in which the rental is 18 times higher than what was paid last year.

Dao Xuan Binh, chairman of the Business Association of Le Chan District (Haiphong City), also noted that the land rentals in Haiphong after adjustment are 5-20 times than those in the same period last year. “It is a double effect that worsen business production activity of many companies,” he said.

In Hanoi, Khuyen Luong Port Company’s new land rent was four times higher than that in 2010. Many businesses in Thanh Hoa and Ninh Binh provinces reported that the land rentals have increased sharply compared to the old levels.

Representatives from these enterprises said that land rental adjustment is necessary and suitable for the annual economic development in order to effectively exploit the State’s land for lease.

“However, the land rental increase should have an itinerary which corresponds to the general growth, and must be reasonable and equal among businesses,” Thach added.

These businesses said that because there are no clear instructions, local authorities have implemented the decree at will, which adversely affects their production and trading. For instance, land rentals calculated on market prices are unreasonable because realty management is still inadequate, so the price assessment is sometimes incorrect.

Next, the fact that localities vaguely use the concept “market price” causes loopholes for corruption, not to mention rising administrative fees.

Thirdly, in the context of high inflation, economic downturn and soaring input costs, the new land rental application timing plus the controversial calculation is directly affecting the very survival of businesses.

Although Decree 121 stipulates that new land rents are applicable as from March 1, many localities have applied it since January 1. When businesses react, taxation departments order enterprises to pay taxes; problems, if any, will be solved later. Any non-compliant company is to be punished.

On the other hand, the decree is applicable to domestic enterprises only while foreign-invested enterprises just pay the land rental one time for 50 years (the unit price at the time they lease land). This is unfair for the home side.

Rigid application

According to Deputy Minister of Finance cum head of the General Department of Taxation Do Hoang Anh Tuan, there are five matters which need to be solved when implementing Decree 121.

Firstly, the time to apply the decree is rather unfavorable because since early this year, businesses have met difficulties caused by inflation, high interest rates and the credit crunch. “The time chosen to implement the decree is problematic,” Tuan said.

Secondly, local authorities still calculate prices based on commercial rate on the land position rather than on land users. Banks that rent the land are different from manufacturing companies, and companies that rent land for realty trading are different from those that rent land to open factories.

Thirdly, land rentals based on market prices of residential land. “State agencies should distinguish the users, those who have to pay at market prices, and those who don’t,” Tuan added.

Fourthly, apart from land rentals set by the Government, it is necessary to define suitable rates on land rentals in cities and provinces. And lastly, there should be equality between domestic and foreign companies. The application of Decree 121 should not negatively affect hundreds of thousands of domestic businesses but create a competitive edge for 9,000 foreign-invested enterprises.

However, Tuan said that the Ministry of Finance is just a tax collector, so businesses should submit petitions to the Government for solutions.

Source: SGT