HCMC Real Estate Association (HoREA) has recently proposed to the government and other ministries and sectors on the method to impose property taxes on individuals owning from the second real estate or more.
In the written document sent to the Prime Minister, the Ministry of Finance and some other ministries on August 9, HoREA suggested that in addition to the function of generating revenue sources, tax is also a regulatory tool. Therefore, property tax law can be applied to houses and land to create a stable and sustainable budget revenue source and to prevent speculation as well as wasteful use of real estate. HoREA assessed that property tax law could be applied to three cases.
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Firstly, only impose property tax on land and house to create a stable, long-term and sustainable state budget revenues. For example, in California state, the property tax of land and house is levied at 1.21% per year, so that in about 82 year, the value of the property will be levied enough 100% and continue to levy this stable tax resource.
Secondly, taxation for people with multiple houses and land (from second properties ) to prevent speculation and waste of real estate. This can help increase the supply to the market, creating more opportunities for people with real needs to access housing.
Thirdly, in the case of the emergence of bubble fever real estate, there is a need to consider levying high taxation on the case of transfer of houses and land immediately after buying. It is possible to calculate tax in the first transaction year since the purchasing time , to prevent speculation, stabilize the real estate market.
However, HoREA believed that the promulgation of the property tax law is only reasonable when simultaneously amending the policy and mechanism of collecting land use fees as provisions of current Land Law which is inadequate at present.
In addition, HoREA proposed not to collect this tax for poor households even if they already have a house but still crowded (for HCMC is below the average of 10m2/person) and they buy a second home, the third home but the total area of these apartments does not exceed 77m2.
“In the first phase, the tax rate should be reasonable, suitable for the capacity of people. For persons having the second home onwards, the tax rate depends on the number and value of assets.
In the case of the emergence of bubble real estate, it is suggested that the National Assembly should assign the Government the authority to issue anti-speculative tax rates, imposing high taxes in cases of transfer of houses, land right after buying to stabilize the real estate market in a short time, ” recommended HoREA.
According to HoREA, the tax law aims to make real estate market develop healthily, transparently and sustainably, prevent speculation and limit the wasteful use of real estate.
If applied, the tax decree will create a wave of cash flow exchange. Rather than investing in real estate, investors will invest in production, business, services. If this occurs, it will create more opportunities for people with real needs to access house and increase stable, long-term and sustainable state budget revenues.
In addition, this tax law also directed secondary investors to choose to establish real estate business instead of individual business as present.
About the process to promulgate property tax law, HoREA suggested that the Ministry of Finance still implement the pathway to promulgate this law before 2020 as previously planned.
Previously, in the report of Government on the development of plan on market assessment, medium-term trends forecast, proposing solutions, mechanisms and policies to promote the real estate market healthily and stably, Ministry of Finance assessed that the tax policy related to property has not yet fulfilled its role as one of the stable sources of revenue for the budget, so it has proposed to study and promulgate property tax law alone for more efficient land use.
Ministry of Finance cites that currently tax revenues from land use in Vietnam only account for only 0.03% of GDP and about 0.15% of total state budget revenues. While in many countries, property tax revenue – especially land use tax – is one of the major sources of budget.
In Vietnam, the real estate market is expected to develop stably and sustainably in the coming time when a lot of new policies such as Housing Law, Real Estate Business Law (amended) and real estate credit came into force in July, 2016.
The Ministry of Finance stressed that Vietnam’s per capita income is increasing steadily in recent years, from $1,400 in 2013 to $ 2,200 in 2016, and is expected to increase to $ 3,400 by 2020.
“The holding, owning and investing in real estate have tendency to increase. To limit speculation, wasteful use of property, it is necessary to research and develop property tax law, “said the Ministry of Finance.
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