Vice Chairman of the Hanoi Urban Development Association Dao Ngoc Nghiem talks to the Science and Life, saying that it is not yet time to ask Vietnamese household owners to pay real estate taxes.

Vice Chairman of the Hanoi Urban Development Association Dao Ngoc Nghiem. — Photo reatimes.vn

How do you respond to the Ministry of Finance’s proposal to levy real estate taxes houses which are valued over a certain amount?

Real estate taxes are applied in many countries, the only difference between them is how the taxes are levied.

In our case, people’s living conditions have only reached the medium level, while the average asset, particularly housing, is still at a lower level compared to other countries in the region.

The majority of Vietnamese people are still living in lower quality homes. So, if the Government wants to levy taxes on their houses, it is important that the Government should conduct a survey to find out a suitable floor tax rate to win the people’s hearts and minds.

Does the Ministry of Finance need to conduct a study on how the floor tax rate should be?

The Ministry of Finance has recently come up with a proposal to tax the land that a house is built on. There are two tiers on how the tax should then be calculated: if the house is worth more than VNĐ 700 million (US$ 30,700) or if it is worth more than VNĐ 1 billion (US$ 43,900).

Based on that proposal, most people living in rural areas, including those who live in social housing projects or houses built especially for low income people, will have to pay housing taxes. “Is that decision fair to the poor?” is a question we need to find an answer to before making the decision.

It is indisputable that the living conditions of many Vietnamese people in the rural areas are still poor. Is it the right time for us to impose real estate tax on them? I think we should consider this before moving forward.

Some people have argued that if the authorities want to impose the housing tax, they need to have a good formula to calculate the value of real estate. What’s your point of view on this argument?

Taxes levied on real estate, to my understanding, are based on the frame work value of a land unit in the country. But in fact, the value of a land unit in our country varies from one locality to another, particularly with regard to the price unit between the State and the free market.

The Government has produced many legal documents governing real estate prices, with a hope to make them closer to the free market price, but until now it remains a question without an answer. In other words, the real estate price depends on the supply and demand in the market.

It is indisputable that the value of a piece of a real estate depends on the economic development of the land in that area. Don’t you agree?

At present we don’t have a specific policy on the management of the real estate market. This is the main reason why the price of real estate sometimes bubbles in localities where there are rumours about the establishment of special economic zones.

For example, in Hà Nôi, when people have heard a rumour saying that some new bridge will be built across the Red River, the land price in those areas climbs considerably. This, in my opinion, is out of the control of the authorities.

So what factors should we base on in calculating the price of a piece of real estate?

In my opinion, evaluating of the value of a house in Viet Nam is quite different from other countries.

In our country, the value of a house is based on the house itself. Meanwhile in developed country, the value of the house is based on house itself, plus the surrounding environment, particularly its infrastructure, including schools, commercial centres, and access to public transport.

So in my opinion, this is something we should develop in a new way, to calculate the value of a house based on its surrounding social infrastructure, including schools, commercial centres and others.

Do you think that it is the right time for Viet Nam to introduce the Law on Real Estate?

All countries should have their Real Estate Laws. But when the country should enact the law is a question for the country authorities to think about and make their decision at the right time.

In our case, the average income per capita is just US$2,300 per year. That’s why I suggest that it is not the right time for Viet Nam to enact the Law on Real Estate.

Further more, the speed of urbanisation in our country remains rather low – 39 out of 100 people live in urban areas, and it is estimated that by 2025 the number will be about half of all people. Now, if we decide to impose the housing tax, I’m afraid to say that our plan to expand the urbanisation space will not become a reality. _VNS