A view of high-rise buildings around Ngoc Khanh area in Hanoi (Illustrative image. Source: VNA)Hanoi (VNA) - The Ministry of Financehas proposed a tax on houses depending on their construction value as part of adraft law on property tax.
Under the proposed law, there are two options:imposing tax on houses with construction value of either more than 700 millionVND (30,800 USD) or 1 billion VND (44,000).
The proposed tax rate is 0.3 or 0.4 percentannually, with only the surplus construction value above the proposed thresholdto be taxed.
For example, if the threshold is set at 700 million VND, the ownerof a 1.7 billion VND (74,800 USD) house would have to pay tax on 1 billion VND,equivalent to 3-4 million VND (132-176 USD) per year.
The construction value of a house is determinedby factors including its type, scale and how many years it has been in usesince construction.
If the tax on houses worth more than 700 million VND is applied,the finance ministry will be able to collect property tax of about 23.3trillion VND (1.01 billion USD) to 31 trillion VND (1.4 billion USD) per year.
If the second option is approved, the tax collection is estimatedto vary from 22.7 trillion VND (987 million USD) to 30.3 trillion VND (1.3billion USD).
The ministry currently favours taxing houses worth more than 700million VND at a rate of 0.4 percent.
According to Pham Dinh Thi, director of Ministryof Finance’s Tax Policy Department,data from other countries show that the lowest property tax rate stands at 0.2 percent.However, countries mostly apply high rates like Indonesia’s 0.5 percent and 1-2percent in the Philippines.
He said taxing houses andtrade-service construction work will impact enterprises’ production andbusiness. The draft is scheduled to be submitted to the National Assembly forfeedback in 2020.
The ministry is also seeking toincrease land tax. Under the same draft law, land taxes in some categoriesmight rise by multiple times compared with those currently stated in the Law on Non-Agricultural Land Use Taxes.
For example, housingland might get a 0.3 to 0.4 percent tax rate, ten times higher than currentminimum rate of 0.03 percent.
The draft law on property tax also proposes tax on personalvehicles such as planes, yachts and cars worth more than 1.5 billion VND (65,000USD).
Truong Thanh Duc, chairmanof the BASICO Law Firm, said aproperty tax law is necessary, however, “people’s incomes must be taken intoconsideration when studying the law enforcement,” he said.
Dang Hung Vo, former Deputy Minister of Environmentand Natural Resources, agreed with the land tax hike by ten times, saying thathousing land tax of 0.4 percent, 0.5 percent-tax on business, trade and serviceland are reasonable. In the future, it could be increased to 0.7 to 1 percent.
If land tax is high, land prices will fall,while if the tax is low, speculative hoarding might happen. If the tax is high,anyone who wants to buy land must consider whether they can afford the tax ornot, he said.
However, he opposed the housing property taxproposal, adding that developed countries impose housing tax depending on housearea (not on value).
Nguyen Anh Tu, a State officer living in Hanoi, saidthat a house in Hanoi and HCM City cannot be bought for less than 700 millionVND.
“I had to borrow 70 percent of the house valuefrom the bank to afford the payment, not to mention additional fees. Now if Ihave to pay an annual property tax, I don’t know when I could pay off thedebt,” he said.
Finance and banking specialist Nguyen Tri Hieu said imposing tax on land and housesis crucial to create equality in owning properties. However, the property taxlaw should require land tax only.
“People already pay personal income tax. Therewill be overlapping taxes if we require people to pay tax on the money they useto buy a house,” he said.
Le Hoang Chau, President of Ho Chi Minh CityReal Estate Association, said if the law takes effect, the real estate marketwill be impacted, slowing business and investment activities.
Disagreeing with the proposal, the Ho Chi MinhCity Real Estate Association proposed no tax on houses worth less than 1billion VND to support low-income and low middle-income people.
Chau also proposed a 0.4 percent-tax on housingland, apartment building land and houses worth more than 1 billion VND.-VNA
VNA
