Concerns about tax exemption for "inherited real estate"

Delegate Hoang Van Cuong (Hanoi Delegation) expressed concern that tax exemption for inherited real estate is a bit different from the rest of the world. Most countries in the world tax inherited real estate and inherited assets. Because this is extraordinary income, not created by labor.

Mr. Hoang Van Cuong speaks (Photo: Quang Vinh)

On November 19, the National Assembly discussed in the hall the draft Law on Personal Income Tax (amended). Delegate Hoang Van Cuong ( Hanoi Delegation) proposed that it is necessary to set out the principle that the family deduction adjustment level must not be lower than the highest increase in the price index or the increase in income. Only then can we have an increase corresponding to the change.

About the tax schedule progressive , Mr. Cuong said, previously there were 7 levels, now it has been reduced to 5 levels. Reducing 5 levels will be convenient in terms of management and calculation. However, the disadvantage is that the difference between the levels is very large.  

For example, the tax rate of level 1 is 5%, which is 10 million VND, but at level 2, from 11 million VND, the tax rate increases to 15%, even to the highest tax rate of 30%, which used to be 80 million, but now it is 100 million, which is 35%. While the average level we adjust for family circumstances is 1.4 times higher, this is not appropriate. "Therefore, it is recommended to maintain 7 levels, and each level is 5% apart to spread out evenly, so that the pressure on tax rates is not too heavy when income changes, and the difference between levels is 20 million. Specifically, level 1 is 20 million, 5%; level 2 is 40 million, 10%; at level 7, 150 million will be 35%," Mr. Cuong said, adding that doing so will encourage taxpayers, and those with high incomes will contribute more.

  Regarding the calculation of personal income tax on the income of business households, according to Mr. Cuong, the level of 200 million VND is not appropriate. “For example, a person selling Ensure milk buys 900 VND/box and sells it for 1 million VND. So one box makes a profit of 100. If 200 boxes are sold, the revenue is 200 million. The revenue is 200 million but the difference is actually only 20 million. Now, 20 million must be taxed immediately, which is unreasonable. While the family deduction for an individual is 186 million, if an individual plus a dependent is 260 million. So the Ensure milk seller should have sold for 2.6 billion VND to get the difference of 260 million, and then they have to pay tax,” said Mr. Cuong.

From there, he proposed to change the level of determining the starting tax for business people. For sales people and agents, the minimum starting level must be 1.5 billion. 1.5 billion means a difference of about 20% to have an income of over 260 million and must pay tax. The level for service business people, and business people who do not have to pay expenses must be at least 500 million. For example, if a hairdresser earns 200 million, their income is only 150 million. Therefore, 200 million must still pay tax, it must be 500 million for the income to be over 260 million. And for other industries, at least production and business must have a starting level of 1 billion or more.  

Regarding the tax on real estate transfers, Mr. Cuong agreed that the transfer tax would be exempted for the sale of only one house. However, he was concerned about the regulation that even inherited real estate would be exempted from the tax.   

Mr. Cuong said, the tax exemption for inherited real estate is a bit different from the rest of the world . Most countries in the world tax inherited real estate, inherited assets. Because this is extraordinary income, not created by labor. Therefore, people must collect taxes to ensure social fairness and avoid the accumulation of assets through generations, which makes the rich stay rich, while the poor stay poor. Therefore, people must tax inherited assets to reduce this difference, creating social fairness.   

To ensure transparency in the real estate market and avoid speculation, it is necessary to tax real estate speculation activities through buying and selling. “Therefore, it is recommended to study a tax policy for real estate bought and sold based on the price difference between the purchase and sale. Regarding digital transformation, we are completing all information on residential land, and managing the price between buying and selling is completely possible. Therefore, it is necessary to tax when performing this transaction,” said Mr. Cuong.

 

Viet Thang - Trung Hieu

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