The suggestion to impose a tax on second homes has resurfaced following recommendations from the Ministry of Construction and the Vietnam Real Estate Brokers Association (VARS).

Many media and social media outlets have reported that the Ministry of Finance supports the proposal. However, the complete response from the Finance Ministry's leadership is as follows:

"Tax policy alone cannot resolve the issue. Other policies, such as those concerning land and urban planning, are also vital. The Ministry of Finance acknowledges the suggestions from the Ministry of Construction and will study general financial policies concerning the real estate and land markets to promote a transparent, stable, and developing market. If the policy isn't comprehensive, it may achieve one goal at the expense of others, ultimately failing to meet the desired objectives."

Thus, the Ministry of Finance is very cautious about the proposal to tax second homes, despite numerous suggestions from various individuals and organizations over the past period.

The caution is justified as any tax policy message is sensitive to the market, including the real estate market. A progressive tax on real estate, in the view of the author, could potentially harm the market, the state, and the public under the current circumstances.

Firstly, across the country, countless plots of land worth hundreds, even thousands of billions of Vietnamese dong are left unused and fenced off; thousands of villas remain abandoned and unutilized—a significant waste of resources. From a social equity perspective, it seems justifiable to implement a progressive tax to combat this phenomenon, potentially reducing real estate prices and making housing more affordable for the less fortunate.

However, this is merely an emotional perspective, deeply understandable and empathetic, yet not reflective of market realities, which are governed by its own laws rather than administrative dictates or human whims.

The market is incredibly diverse and colorful. For example, what is the difference between "investment"—seen as positive - and "speculation" - often viewed negatively?

From an individual's standpoint, is purchasing one or two extra plots of land or houses for wealth preservation or future inheritance considered investment or speculation? How can we clearly define these terms?

From a business perspective, is buying a plot of land to expand operations over the next five to ten years considered long-term investment, or speculation? And if a company needs to sell that land after three years due to a change in business plans, is that action investment or speculation?

How do we distinguish between investment and speculation in order to apply this tax to minimize speculative behavior?

Developed countries have experienced capital flight due to progressive property taxes. The damages caused by such taxes have included capital withdrawal, brain drain, job losses, and reduced tax revenues.

Property taxes have been reduced in recent decades, and many countries, including those in the OECD, do not apply them. They directly impact the removal of assets from the economy and can create recessionary effects, including job losses.

An article in The Washington Post titled "Old Money, New Money Leaves France and the Story of Property Tax" highlights some damages caused by France's property tax, such as capital flight, brain drain, job losses, and tax revenue losses. Estimates suggest that while the French government collected about $2.6 billion annually from property taxes, it cost the country over $125 billion from 1998 to 2006.

Moreover, land data, both urban and rural, are not sufficiently updated before considering taxation.

At the very least, this is a channel for speculation - or investment, depending on your perspective - by those with excess money. A progressive tax on real estate could redirect investment flows outward, stalling the real estate market locally, leading to production material and auxiliary equipment manufacturers facing sales drops, and many workers losing their jobs.

Especially when domestic investment feels insecure, people may opt to buy properties abroad instead of locally.

The argument that taxing second homes helps the poor afford housing is speculative and utterly impractical. The new Land Law is designed so that land is priced at "market value," which economists say often corresponds with speculative, peak prices.

When the Land Law came into effect earlier this year, it triggered a "boom" in land prices in many places, especially in Hanoi and Ho Chi Minh City, despite the struggling economy. Future projections indicate that the younger generation will find it increasingly difficult to access land and housing due to soaring prices.

To genuinely "provide housing for the poor," different policies are needed, particularly other types of taxes. In some countries, home loans are offered at interest rates of just 1-2% for terms of 50-60 years, and taxes are reduced for real estate businesses. Following market rules, a social housing program can operate smoothly, attracting enterprise participation and enabling the poor to access housing.

The real estate market is currently facing significant challenges, 70% of which relate to legal issues. Coupled with a pervasive fear of responsibility, very few projects are permitted, causing the market to suffer from lower supply than demand - a situation entirely opposite to that in China. In Hanoi or Ho Chi Minh City, the lack of supply amid high demand has caused housing and land prices to skyrocket.

Thus, any policy regarding real estate taxes, especially on second homes, as analyzed, must be carefully researched to avoid causing panic, diminishing trust, and negatively impacting the market and banks in the current context.

Tu Giang