Businesses "shocked" by 2011 land rental prices

Land rent in 2011 is a "hot" issue for the business community in Nghe An. Thousands of businesses in the province are shocked and worried that if the newly issued land tax policy is applied, it will push businesses into extremely difficult situations.

In early June 2011, Nghe An Automobile Mechanical Joint Stock Company received a Notice of payment of land rental tax for 2011.with the arising amount of 3,349,118,000 VND. Holding the hot notice of Nghe An Tax Department in his hand, Mr. Le Huy Phuong - Director of the Company could not help but be shocked.

Up to now, land rent has increased every year, but this is the most sudden and shocking increase for the company. In 2010, the land rent that the company had to pay was 518 million VND, but suddenly in mid-2011, there was a notice that the land rent payment was up to approximately 3,350 million VND, 6.46 times higher than in 2010.

Moreover, it was not announced until the end of the second quarter. At the shareholders' meeting at the beginning of the year, all the company's planned targets were specifically set out, so where could the company look to find nearly 3.5 billion VND to pay for land rent? While all companies are currently under a lot of pressure: market competition, ensuring salaries for employees, rising input costs, too high bank interest rates... What can companies do to have enough profit of over 35% to pay for such sky-high input costs? If they follow the new land rent price, the company cannot afford it.

Mr. Tran Anh Son - Director of Nghe An General Import-Export Agricultural Products Joint Stock Company complained: In 2010, the total land tax that our company had to pay was 610 million VND. In 2011, we received a notice that the total land tax to be paid was 2,745 million VND, more than 4 times higher than the land tax in 2010. Meanwhile, the company's profit was 1.4 billion VND/year. Where did we get the money to pay the land tax? With such a high rental fee, it is too inconvenient for Nghe An enterprises in the current conditions.

Sharing the same sentiment, Mr. Bui Thanh Chung - General Director of Vietnam - Laos Economic Cooperation Investment Joint Stock Company was upset: in 2010, the Company's land rent was 217 million VND, suddenly in June 2011, the Company received a Notice that the total land tax that the Company had to pay was up to 1,281,360,000 VND, 6 times higher than the price last year. In the current situation, business is difficult, after the first 6 months of the year, the Company has only achieved 30-40% of the plan. If the land rent is paid as high as it is now, the Company will lose capital.

According to Mr. Tran Anh Son - Vice President of Nghe An Outstanding Business Association, businesses all share the same opinion: the policy of increasing land tax is correct, because of policy changes, and at the same time to increase budget revenue for the province, thereby businesses must strive to expand production to maximize land exploitation, effectively use leased land.

However, enterprises all realized that the application of land rental calculation method for Nghe An enterprises is not suitable with the reality of the socio-economic development situation of the province in general and the production and business situation of Nghe An business community in particular. While the economy in the first 6 months of the year was difficult, inflation was high, and input costs of enterprises increased dramatically. In that context, the increase in land rental of Nghe An province in 2011 compared to previous years was too much for enterprises to bear.

Meanwhile, through consulting other provinces such as the two major economic centers of Hanoi, Ho Chi Minh City and Da Nang, Ha Tinh, Thanh Hoa... their land rental prices are much lower than Nghe An. Determining land prices and high land rental prices greatly affects the production and business activities of enterprises, social security work in the business community and especially affects the investment attraction work of the province.

Because land rental costs are included in the input costs of enterprises, if they carry out the same project with the same infrastructure conditions, but the land rental price is lower, investors will naturally choose the locality with low land rental prices, they will have more advantages in product competition.

According to Mr. Nguyen Manh Toan - Deputy Head of Land Management Department of the Provincial Department of Natural Resources and Environment: The 2003 Land Law stipulates that the principle of determining land prices is that land prices must be close to market prices. However, the price level issued by the province in 2011 is only 50-70% of the market price. For example: land on Minh Khai Street - Vinh City, the market price of land is 100-110 million VND/m2, but in the Provincial Price List, the highest is 45 million VND/m2. The market price of land on Le Loi Street is from 80-100 million VND/m2, but in the Provincial Price List, the highest is 42.5 million VND/m2... Thus, through comparing the price level between the Provincial Land Price List and the market price, the claim that enterprises pay a lot of land rent due to high land prices is not convincing - Mr. Toan said.

Mr. Toan said that land leasing and land allocation with payment is completely voluntary. If the enterprise finds that its production and business capacity is not effective on the total leased land area, it should arrange to save the land area, return the surplus land to the State so that the State can lease it to other units in need and the enterprise can also reduce the burden of land rent.

However, Mr. Hoang Minh Quan - Head of Price and Public Asset Management Department of the Department of Finance said that compared to the general level nationwide, the market land price in Vinh city and the price list of the province is a bit high. However, some enterprises in the area are "holding" too much land, during this period, enterprises should review the land area and rearrange the appropriate usage area.

Unnecessary areas should be returned to the state to reduce land rent for enterprises. The province's policy also aims to encourage enterprises to make efforts in production and business, maximizing the exploitation of leased land areas. At the same time, it limits the situation of enterprises renting land "hanging" without using it, then leasing it to other units over and over again...

Quynh Lan