Dr. Nguyen Tri Hieu

How do you evaluate real estate tax in Vietnam?

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 asset hoarding.

Developed countries such as the US, Canada, Japan and South Korea all apply annual property tax, calculated on the value of real estate, to ensure fairness in asset distribution and create sustainable revenue for the state budget.

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 fee. From international experience, it can be seen that Vietnam has not applied real estate tax effectively.

How does ineffective application of real estate tax affect the country's socio-economic development?

Real estate is one of the investment sectors with high profit. The ineffective application of real estate tax in Vietnam has led to some notable consequences. The most obvious is the increase in real estate speculation and hoarding. Because when not subject to tax pressure, many individuals and organizations tend to invest in real estate for long-term holding instead of exploiting or putting it into transactions. This contributes to the decline in housing supply to serve real housing needs, causing real estate prices to increase.

In addition, the state budget "misses" an important source of revenue. Because 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.

Taxing real estate second is reasonable to ensure fairness for society

There is currently a proposal to impose a second property tax to address the above shortcomings. What do you think about this solution?

Taxing real estate secondarily is reasonable to ensure fairness for society as well as increase tax revenue for the country, minimizing risks for the economy.

Currently, US citizens are taxed on their first home. The tax office will use the value at the time of purchase to tax the property. Each year, the tax office may revisit the taxable value based on that. However, this is a local tax, not a state or federal tax. The tax rate will be around 1-3% of the property value. If the first home is used as a residence, it is still taxable. However, the interest paid to the bank when borrowing real estate is deducted from non-taxable income.

For the second or more properties, all are subject to normal tax, without any incentives. Real estate tax is applied annually based on the market value of the property. If the value of the property increases, the tax rate is also adjusted accordingly. This is a flexible mechanism, reflecting the actual value of the property over time.

Therefore, in Vietnam, the first real estate tax can be considered because we are encouraging people to settle down. From the second house, it should be taxed because people who own a second house are often high-income people, taxing will create social justice, and at the same time will avoid speculation. However, the implementation needs to be carefully considered to ensure it is consistent with market reality and socio-economic conditions at each time.

What solutions are needed to manage real estate taxes to ensure fairness while avoiding creating unwanted impacts?

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.

First, the Government can reform real estate tax in the direction of progressive taxation on second and subsequent properties to limit speculation while ensuring that those 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 short, 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.

Source: https://thoibaonganhang.vn/ap-thue-bat-dong-san-can-dam-bao-cong-bang-va-lo-trinh-hop-ly-161496.html