Increasing pressure on low-cost home buyers

The recent proposal by the Ministry of Finance to increase VAT from 10% to 12% from 2019 will cause real estate prices to increase, directly affecting home buyers, especially low-income earners.

According to real estate experts, real estate products use thousands of products from many different manufacturing industries from construction, business to services. Therefore, increasing VAT from 10% to 12% from January 1, 2019 will cause input material prices and construction prices to increase. This means that house prices will also increase, and real estate transactions may decline.

Real estate products for low and middle income earners currently cost an average of 1-2 billion VND. Increasing VAT to 12% will put more pressure on consumers, especially in the low-cost housing segment, as prices could increase by tens of millions to hundreds of millions of VND.

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According to economist Nguyen Minh Phong, to ensure social housing policy, it should be considered not to increase across the board but only increase in the category of high-end goods, villas, resorts, and houses for high-income earners, without affecting the rights of middle- and low-income earners. For the rich, a house price increase of a few tens of millions is not significant, but for the poor, it is a problem.

Sharing the same view, expert Dang Hung Vo, former Deputy Minister of Natural Resources and Environment, said that raising taxes will increase costs for low-cost housing while the policy should reduce more taxes.

According to experts, the Ministry of Finance has not yet conducted any specific research on the impact of the tax increase on the budget, the economy and the people. If the tax increase is from 10% to 12%, how much more money will be added to the budget and how will people's lives be affected, especially the poor?

With Vietnam's current per capita income of just over 2,000 USD/year, the tax increase will certainly affect people, especially poor people who are in need of buying housing.

Not only does the draft law propose to increase VAT, it also plans to impose VAT on land use rights transfers. According to Mr. Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association, this is unreasonable.

According to Mr. Chau, Clause 6, Article 5 of the current VAT Law stipulates that "Transfer of land use rights" is not subject to VAT, which is completely correct to avoid the situation of double tax, consistent with the practical situation and reasonable. Now, the draft Law proposes to apply VAT when transferring land use rights, which will lead to the situation of "double tax", increasing the selling price of the house that the buyer has to bear. Therefore, the Association recommends that not applying VAT when transferring land use rights is more reasonable.

Mr. Chau said that the Association fully understands the difficulties in the State budget revenue when implementing the commitment to reduce taxes in the process of integrating into the world economy, while also having to cover regular expenses and expenses for development investment. However, VAT has a huge impact on the economy, all businesses as well as people's lives.

Currently, in ASEAN countries, Indonesia, Laos, and Cambodia also apply a VAT rate of 10%; Singapore 7%, and Thailand 5%.

"For the real estate market, increasing VAT to 12% will lead to an increase in the price of raw materials, construction contracts, labor... and house prices will also increase," said Mr. Chau.

According to Hoang Duong/baotintuc