Vietnam's ineffective application of real estate tax
At the recent workshop on Personal Income Tax Law organized by Lao Dong newspaper, Dr. Nguyen Tri Hieu, Director of the Institute for Research and Development of Global Financial and Real Estate Markets, commented: The failure to effectively apply real estate tax in Vietnam has led to a number of consequences.
According to Dr. Nguyen Tri Hieu, in Vietnam, real estate tax currently only stops at revenues such as non- agricultural land use tax, personal income tax from real estate transfer, and registration fees.
Vietnam's ineffective application of real estate tax has led to many consequences of land speculation. (Photo: TNMT)
Meanwhile, developed countries such as the US, Canada, Japan and South Korea all apply annual property tax on real estate value, to ensure fairness in asset distribution and create sustainable revenue for the state budget.
Regarding the consequences, Dr. Nguyen Tri Hieu said that ineffective taxation has led to an increase in real estate speculation and hoarding. When not subject to tax pressure, many individuals and organizations tend to invest in real estate for long-term holding instead of exploiting or trading.
“This contributes to the decline in the real housing supply to serve real housing needs, causing real estate prices to increase,” said Mr. Hieu.
In addition, the state budget misses out on an important source of revenue: When real estate is not subject to regular property tax, the state loses a stable, long-term source of revenue, while having to rely heavily on corporate income tax and value-added tax (VAT).
"This makes the tax system ineffective in regulating the economy ," Dr. Nguyen Tri Hieu emphasized.
According to Dr. Nguyen Tri Hieu, real estate tax is considered an effective tool to control speculation, create a stable source of revenue for the budget and direct capital flows into economic activities instead of hoarding assets. However, implementation needs careful consideration to ensure it is consistent with market realities and socio-economic conditions at each point in time.
“Taxing assets not only requires fairness in the tax system, but also requires a reasonable roadmap to avoid creating unwanted impacts, especially in the context of the market needing stability,” Mr. Hieu raised the issue.
How to tax appropriately
Talking to reporters of the Journalists and Public Opinion Newspaper about solutions to "tax" real estate, Dr. Nguyen Tri Hieu said: Real estate is one of the investment fields with high profits but is currently not subject to periodic property tax. This creates conditions for speculators to hoard real estate without any tax pressure, causing housing prices to increase, affecting the ability of low-income groups to access housing.
Dr. Nguyen Tri Hieu, Director of the Institute for Research and Development of Global Financial and Real Estate Markets. (Photo: DT)
Therefore, Mr. Hieu proposed 3 solutions, recommending that the Government can implement real estate tax reform.
First, "levy" progressive taxes on second and higher real estate to limit speculation but still ensure that people with real housing needs are not affected.
Second, exempt or reduce taxes on social housing and housing for low-income people to ensure access to housing for this population group.
Third, decentralizing tax collection to local governments, similar to the model of many developed countries, helps localities have more revenue to develop infrastructure and public services.
“In general, real estate tax is an important tool to regulate the market, limit speculation, and increase budget revenue. However, implementation needs to be carried out according to a suitable roadmap, ensuring stability for the real estate market, while not causing too much disruption to investor psychology as well as people's ability to access housing,” said Mr. Hieu.
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