Will businesses actually benefit from the proposed 30% reduction in land rent?

(CLO) Currently, different localities calculate land lease prices differently; in some cases, two neighboring localities may have calculation methods that differ by as much as 30% - 40%. Some localities, like Binh Duong, have reasonable prices, but there are also localities, even those that are predominantly agricultural, that charge very high lease prices.

What benefits would businesses receive from the proposed 30% reduction in land rent?

Recently, in early January 2025, the Ministry of Finance proposed a 30% reduction in land lease fees payable for 2025, similar to the land lease fee reduction policy for 2021, 2022, 2023, and 2024.

According to experts, this policy aligns with the government's determination to achieve an 8% economic growth rate in 2025, aiming to create momentum for double-digit growth in the 2026-2030 period.

Businesses actually benefit from the proposed 30% reduction in land rent (Figure 1). — Currently, different localities calculate land lease prices differently. (Illustrative image)

The Vietnam Chamber of Commerce and Industry (VCCI) believes that the policy of reducing land rent will help businesses alleviate financial burdens, enhance their ability to respond to global economic risks, and thus make a significant contribution to realizing the 8% growth target in 2025.

With the proposal to reduce land tax by 30% in 2025, the Vietnam Chamber of Commerce and Industry (VCCI) believes that the policy of reducing land rent in the years from 2021 to 2024 has had a positive impact on the economy. The 30% reduction in land rent in previous years is considered reasonable.

"This reduction helps businesses have more resources to recover production and business activities, but it is still controlled within permissible limits, ensuring that it does not significantly affect total state budget revenue," VCCI said.

Meanwhile, many experts say that from 2024 to 2025, businesses will still face difficulties due to the significant impact of the fluctuations in the domestic and global financial and economic crises.

To ensure the survival and accumulation of finances for long-term investment plans, creating momentum and impetus for business growth in the coming period, a 30% reduction in annual land lease fees payable by businesses is essential and timely.

However, Mr. Nguyen Anh Tung, Director of G24 Real Estate Company, believes that it is necessary to select the right beneficiaries to ensure social fairness and that businesses, no matter how small, benefit. This is crucial because support policies are intended for those in need. A one-size-fits-all approach often not only creates resentment but also harms the country's financial resources.

Speaking with a reporter from the Newspaper of Journalists and Public Opinion, Mr. Pham Duc Toan, CEO of EZ Property Investment and Development Joint Stock Company, agreed with the Ministry of Finance's proposal to reduce land lease fees by 30% in 2025.

Mr. Toan stated that many businesses, including major players in the real estate sector, are currently facing significant difficulties in paying land use fees. This is because many localities have recently adjusted their land price lists, with relatively high increases. In some cases, the adjustment has resulted in a 300% increase, which has driven up land lease prices.

"When land lease prices surge, it disrupts all cash flow, revenue, and profit plans for businesses. Therefore, the Ministry of Finance's proposal is reasonable in some localities with moderate adjustments. For localities that have just adjusted their land price tables with a 300% increase, this reduction is insignificant," Mr. Toan said.

Businesses will actually benefit from the proposed 30% reduction in land rent (Figure 2). — The policy of reducing land rent will help businesses alleviate their financial burden. (Photo: ST)

In addition, Mr. Pham Duc Toan stated that currently, localities calculate land lease prices differently. In some cases, two neighboring localities may have calculation methods that differ by as much as 30% - 40%. Some localities, like Binh Duong, have reasonable prices, but there are also localities, even those that are predominantly agricultural, that charge very high lease prices.

"Determining land lease prices is the responsibility of local authorities, but the situation where each province calculates a different price will have a significant impact on businesses operating in multiple localities," Mr. Toan said.

In this context, to ensure that policies are aligned with reality, Mr. Toan suggested that the Ministry of Finance needs to establish standards and specific guidelines on methods for calculating land lease prices to ensure consistency nationwide. This would help to standardize land price calculations.

Maintaining the policy of reducing land rent for many years does not affect budget revenue.

In fact, during the period 2020-2024, Vietnam maintained a policy of reducing land rent by 30% and exempting, reducing, and extending certain other taxes and fees, in order to support the economy's recovery after the "shocks" related to the pandemic and natural disasters.

It is clear that reducing land rent and other fiscal policies will lead to a decrease in budget revenue; however, according to many experts, this policy is necessary to support the recovery of the business community, thereby stimulating economic growth.

According to a report by the General Department of Taxation, the amount of land and water surface lease fees reduced in 2020 was 2,890 billion VND. The average reduction for the years 2021, 2022, and 2023 was 3,734 billion VND per year.

The General Department of Taxation believes that these policies have contributed to supporting businesses, organizations, units, households, and individuals in overcoming difficulties caused by the Covid-19 pandemic so that they can quickly restore production and business activities.

In 2024, the amount of land lease fees is expected to decrease by approximately VND 4,000 billion, equivalent to 0.26% of the total state budget revenue per year and 9% of the state budget revenue from land lease fees per year.

Regarding this issue, the Ministry of Finance believes that the reduction in land rent under this policy will not significantly affect overall state budget revenue, but will have a major impact on the recovery and development of production and business activities of organizations, individuals, households, and enterprises, thereby increasing state budget revenue from taxes to compensate for the reduction in revenue due to the land rent reduction.

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