The Ministry of Finance (MOF) has announced its plan to build a law on property tax but its controversial provision of a housing tax has raised public concern and even opposition in recent days.
According to the MOF, the law is part of an effort to reform the tax system in a more inclusive way to create resources for socio-economic development.
A look at international experience shows that a property tax is currently levied in 174 out of 193 countries worldwide, mostly on land and housing.
Property tax is a significant source of government income, accounting for an average of 3-4%. The proportion is 8% of GDP in Japan and approximately 2% in a number of developing countries in Asia.
In Vietnam, revenues from property tax account for just 0.036% of GDP and the tax is currently applied to land only.
Although the property tax law has been formulated with lofty goals in mind, many people have expressed their concerns and even objections as soon as it was publicised. The most hotly debated provision in the draft law is the tax on housing, as the MOF proposes a rate of 0.4% for a home valued over VND700 million (US$30,800).
Under this regulation, most houses in cities and a significant number of houses in rural areas will be subject to the property tax. The majority of city residents will have to pay the tax because the prices of most houses in a city are above the VND700 million threshold. The public has also questioned the accuracy, equality and transparency during the evaluation of house prices.
During discussions on the draft law, some suggested that the tax should only be levied on second homes. But the MOF disapproved the suggestion, stating that it is not appropriate with Vietnamese conditions and requires the coordination of many agencies, particularly in the complexity of determining the second homes of individuals and organisations.
This argument has prompted the public to think that the MOF is seeking the easier option by taxing homes worth VND700 million or more.
The property tax is an effective instrument in many countries and in Vietnam it is a correct and necessary policy to help manage properties in line with international practices and the context of global economic integration.
However, it is necessary to look at the specific conditions of Vietnam when implementing the law, especially ending the state management agencies’ mindset of choosing the easy way, which places more burden on the people and creates loopholes that can be exploited in the process of evaluating house prices and determining those exempt from the tax.
In addition to expanding the tax base, the MOF needs to take bold action to reduce expenditure and prevent the loss and waste of government revenues in order to ensure a healthy and sustainable budget.
Although it is only an initial draft, the functional agencies should continue to listen to constructive opinions so as to fine-tune the law and develop an implementation roadmap appropriate with Vietnam’s socio-economic reality.
Source: NDO
previous post