The Ministry of Finance (MoF) has just proposed to impose taxing houses which are priced over VND700 million (roughly $30,800) each. Residential properties valued under $30,800 would not be taxed; those above that threshold are taxed at the rate of 0.4%.
This proposal has ignited a heated debate among real estate experts and provoked the strong reaction of the public over the past few days.
Not suitable for the situation of Vietnam
According to PhD. Nguyen Van Dinh, Vice President of Vietnam Association of Realtors (VARs), the MoF estimated that if applied, the property tax would provide the State budget with an abundant source of revenues.
This tax has been applied effectively in many countries around the world. However, in Vietnam, this tax may lead to overlapping taxation, which puts an added burden on the modest income of the people.
Sharing the same view, Le Hoang Chau, Chairman of Ho Chi Minh City Real Estate Association (HoREA), said that the main difference was that in other countries, individuals could privately own land, which means that the State did not charge "land use fees" as in Vietnam.
Nguyen Quoc Hiep, Chairman of the Global Petro Investment JSC., (GP Invest), also said that the effects on the economy would be tremendous yet. The real estate market would be negatively affected by the loss of appeal to real estate investors and buyers.
According to economist Pham Chi Lan, transparency in tax raising and budget spending was the main reason that people always negatively reacted to the tax-raising proposal of the MoF.
"If the tight budget needs an immediate boost, the State should clarify how the tax money is used for taxpayers," she said.
Also, the State also needs to reduce spending and explain clearly the budget plan. The tax burden should not be pushed to the people forever, as it is unfair to them, the economist said.
Housing taxes to tackle the budget deficit?
Contrary to many experts and the public opinion, recently, economist, PhD. Dinh The Hien shared his opposite perspective on his personal facebook page.
Hien said that if the budget was low, it was necessary to endure additional taxation in a certain period to overcome difficulties. The "extra income" should be collected from those whose assets are above average.
Contrasting the opinion that the current budget deficit was due to wasteful spending and the cumbersome State agencies, PhD. Dinh The Hien said that those two issues must be separated. If the people were not pleased with the budget spending situation and unwilling to pay tax, it would be just sophistry.
The expert said that taxing houses priced over $30,800 is relatively reasonable.
Hien said: "Houses priced under $30,800 are exempted from tax. This threshold was based on the housing prices in Ho Chi Minh City, which has the most expensive houses."