The Ministry of Finance’s intention to impose a so-called asset tax on second-home owners must be studied carefully to prevent negative impact on the real estate market, which still lacked transparency, experts said.
Recently, the finance ministry said it would compile a law on asset tax, including taxes on owners of more than one house, to limit speculation as well as wasteful use of real estate assets.
This stirred the realty market which only recently escaped a prolonged frozen period to enter recovery thank to a combination of support measures, but currently still lacked market information transparency.
“Viet Nam does not have adequate market information, which will make it difficult to tax second-home owners effectively. It is not the right time to impose asset tax on home owners,” property expert Dang Hung Vo said.
According to Matthew Powell, director of property services firms Savills Ha Noi, many countries now imposed taxes on second-home owners, but in Viet Nam, caution was required.
At present, Viet Nam’s real estate market was stable, thus, the tax imposition could cause a decline in market demand and purchasing power, he said, adding that tax should be applied only when there was significant imbalance between market supply and demand.
Vu Van Phan, deputy director of the Housing and Real Estate Management Department under the Ministry of Construction, said the real estate market was especially sensitive to policy changes.
For the long-term, the imposition of asset taxes, including home-ownership tax was necessary, but when to tax, how to tax and who would be taxed needed to be studied thoroughly, Phan said.
Phan added that purpose of imposing tax would be to prevent speculation and encourage home owners to use their assets more effectively.
Tax land or home?
Phan said the Government currently imposed tax on non-agricultural land at a rate of 0.03 per cent of the Government’s fixed land prices (much lower than the market price). The tax rate on non-agricultural land was too low to encourage land owners to use their assets with efficiency and prevent speculation, compared with the rate of around 1 per cent in many countries, Phan said.
A report by the Ministry of Finance revealed that collection of land use fees in Viet Nam accounted for 0.03 per cent of the country’s gross domestic product and 0.15 per cent of the State budget revenue. In comparison, collection from asset taxes accounted for around 4 per cent of Canada’s GDP and 3 per cent of the United States’.
According to Phan, tax on non-agricultural land could be considered a kind of asset tax, thus, it was necessary to ensure there was no overlap with the new tax on home owners, adding that there would be two options -- replacing the tax on non-agricultural land or amending it towards taxing land with houses.
According to Nguyen Van Phung, director of the Large Taxpayers Management Office under the General Department of Taxation, it was important to develop a transparent and healthy real estate market to support tax collection. — VNS