– One of the five targets of the housing tax draft is to fight real estate speculation, which continues to plague the real estate market. However, experts have said that with the suggested taxation method, the target would not be obtained.

Vietnam News.vn/biz/2009/07/861112/">Houses worth over 600 million dong to be taxed

Under the draft housing tax law which will be presented by the Ministry of Finance, on behalf of the Government, to the National Assembly’s Steering Committee in September, only houses worth more than 600 million dong would be taxed. A 0.03 percent tax would be imposed on land plots under the area limit, while the tax rate of 0.06 percent would be imposed on land lots which were less than three times higher than the area limit, and the tax rate of 0.09 percent on land plots of more than three times the limit.

Professor Doctor Dang Hung Vo, former Deputy Minister of Natural Resources and the Environment, said that with the suggested tax rates, the housing tax law would not help prevent speculation and encourage the effective use of land. The tax rates are so low that the institutions and individuals who owned many houses and parcels of land would not be discouraged by the tax duties.

Agreeing that the suggested tax rates would be too low to discourage speculators, Lawyer Truong Thanh Duc, Chairman of Basico Law Firm, pointed out that the suggested housing tax rates are unreasonably low in comparison with the personal income tax. Duc said that while individuals who earn four million dong a month only, a modest income, have to pay high personal income tax (5-35 percent), people who own many houses and land in urban areas, who are the actual high-income earners, would not be paying a similar percentage in housing taxes. Duc said that it is necessary to adjust the housing tax rates to ensure equity in tax laws.

Sharing the same view, Lawyer Le Thanh Son from the AIC Law Firm, also said that the draft law would not attain any of its five stated targets.

The draft housing tax law stipulates six subjects who would be able to enjoy tax exemptions and six subjects who would be able to enjoy 50 percent tax reductions. Son said that no one should be allowed to enjoy tax exemptions or reductions. The principle that should be respected is that all people and institutions who have houses and land use rights must pay tax, with no exclusions.

Deputy Director of the Tax Policy Department under the Ministry of Finance Pham Dinh Thi acknowledged that the draft law would not be able to prevent speculation, but said it would help a little.

Thi said that even in foreign countries, where high tax rates of 2-5 percent are imposed, speculation still exists.

“In order to fight speculation, it is necessary to apply comprehensive measures and tools,” he said.

Currently, real estate trading firms have to pay a 25 percent tax for their real estate trading under the corporate income tax. Meanwhile, individuals also have to pay taxes on income from real estate trading (either 25 percent of the profit, or the margin between the sale and purchase prices, or 2 percent of a piece of real estate’s value) under the personal income tax. According to Thi, these are the important taxes which can play an important role in fighting speculation.

However, Vo believes that the housing tax law could completely stop speculation if it set reasonable tax rates.

“The tax rates in Vietnam are just 30-50 percent of the average tax levels in the world. The suggested tax rates should be applied in the first period of the law’s implementation, so that Vietnamese people can get used to the new tax law. However, the tax rates need to be adjusted later,” he said.

VietNamNet/DT