Taxing houses over 700 million VND could push up real estate prices

Chairman of the Ho Chi Minh City Real Estate Association, Le Hoang Chau, said that the Property Tax Law, if enacted at the present time, will have a huge impact on the real estate market and consumers. Besides the positive aspects such as strengthening the effectiveness of state management, increasing budget revenue, contributing to making the real estate market transparent and healthy,Mr. Chau also pointed out concerns that if property tax is imposed on housing groups of 700 million VND or more, first, there will be a situation of "tax on tax", because consumers (home buyers) will have to pay both a huge land use fee and property tax. Second, it will affect the housing price level in the real estate market in an upward direction. Third, it will reduce some of the investment and business activities of secondary investors, leading to the possibility of a decline in transactions in the real estate market.

General Director of Viet An Hoa Company, Tran Khanh Quang, commented that if the property tax on houses worth 700 million VND or more is put into practice, it will affect over 95% of the housing market in Ho Chi Minh City, meaning over 95% of home owners will be subject to tax.

According to Mr. Quang, in the short term, the planned property tax may not have much impact, but in the medium and long term, this tax will be a warning about the risks of the investment market. "When the market is intervened by unexpected policies, negative reactions may occur. However, at this time, it is still too early to predict upcoming reactions," Mr. Quang said.

This expert believes that taxing houses worth 700 million VND or more is actually leveling the playing field, affecting all housing segments, and the end consumer will suffer more. If this tax is applied in a reasonable manner, taxing second homes would be more targeted at speculators.

In addition, Mr. Quang said that the current valuation activities to determine tax rates are not standard, which will lead to unfair taxation between apartments and individual real estate. For example, the tax valuation of apartments is nearly 80-90% of the market price while individual real estate is 15-20% of the market price, which is unreasonable.

“In the near future, about 30% of long-term home owners in Ho Chi Minh City will suddenly receive a property tax and this could cause a psychological shock to the market,” the expert predicted.

Meanwhile, Mr. Nguyen Quoc Hiep, Chairman of the Board of Directors of GP Invest, said that in reality, many countries in the world also impose property taxes. However, in the current context of Vietnam, it is necessary to consider making this decision when balancing with other taxes being implemented because this will certainly immediately affect the real estate and construction market - a sector that contributes about 11-12% of GDP each year.

According to him, currently, many Vietnamese people have real estate for rent to improve their income. If there is an additional tax, this group of customers will definitely consider it because they have to pay tax every year, even after buying it, they do not know whether they can sell it or not, but they have to pay tax. That will limit transactions and the market will be quiet.

According to him, currently, from the perspective of enterprises, the annual corporate income tax has to be paid, although it has decreased, it is still 20%. And from the perspective of individuals, the highest personal income tax rate is 5%, and the highest has reached 35%, equivalent to developed countries. Thus, according to him, the current tax policy has also regulated legitimate sources of revenue. If another tax is added, according to this expert, it could lead to a situation where there are too many tax levels. Therefore, the management agency needs to consider the gains and losses for the market and the budget if making this proposal.

With the above concerns, he said that the proposing agency should consider based on two criteria, one is whether to apply property tax at this time or not and if implemented, what the collection rate will be so as not to affect the market and budget revenue from the real estate sector.

Mr. Le Ngoc Quynh, Director of Thinh Vuong Investment and Cooperation Joint Stock Company, said that this proposal would affect most real estate products and segments in big cities. However, he said that in the short term, it would not have much impact on the market because the proposed amount is not too large and will certainly have to go through many more consultations before it can be approved.

Previously, in the meeting on April 13, the representative of the Ministry of Finance said that they had just proposed to the Government to submit to the National Assembly Standing Committee and the National Assembly to include the draft Law on Property Tax in the Law and Ordinance Development Program for the 14th National Assembly. Accordingly, this unit proposed a tax rate of 0.4% of property tax on apartments, residential land, land for building apartments, business land..., with a value of 700 million VND (calculated for the value exceeding 700 million VND) per year. For example, a house worth 1.7 billion VND, the owner will have to pay 4 million VND per year in property tax for the part of 1 billion VND exceeding that tax threshold.

A representative of the Ministry of Finance said that the proposed contents of the Property Tax Law have not yet been sent to ministries, branches, and local People's Committees for comments and widely posted on the website. The consultation with these agencies will take place in a few days. After that, based on the received comments, the agency will ask for the Ministry of Justice's appraisal and include it in the law-making program.