Finance Ministry plans to impose progressive tax on houses to reduce speculation

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Finance Ministry plans to impose progressive tax on houses to reduce speculation

11/18/2016 11:28:00 AM

Progressive taxation is expected help reduce speculation in housing, according to the Ministry of Finance (MOF).
 

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MOF is considering possible measures to tax individuals’ assets of wealthy people. 

If they have more than one house, their second and subsequent houses will be subject to a progressive tax, said Vo Thanh Hung, director of MOF’s State Budget Department.

MOF’s director of the Tax Policies Department Pham Dinh Thi, has confirmed the information, saying that it was necessary to create the law on taxing assets. It has been added to the National Assembly’s law building program.

“The property tax would be imposed on houses and other types of assets,” Thi said.

Dang Hung Vo, former Deputy Minister of Natural Resources and the Environment, the best-known expert on land in the country, has applauded the taxation plan.

At present, houses in Vietnam do not bear tax. The State does not tax assets on land, but only taxes the land. The tax rate is low, just 0.03 percent of the land price set in the state’s land price framework.
 

Hidden properties will be more exposed to the public. Real property owners will be reluctant to register their houses under others’ names because of tax duties.

According to Vo, other countries tax both land and houses, and the tax rates are 1-1.5 percent of the market price. Taxation is the major source of income for infrastructure development and urban upgrading. The countries also impose progressive taxes on second and subsequent taxes.

Vo praised the policy being applied in the US, where higher taxes are imposed on $100,000-200,000 houses.

“This is a very good policy based on the ‘low price – high tax’ principle. Meanwhile, Vietnam chooses the ‘high price – low tax’ principle,” Vo said.

No more ‘ghost’ urban areas?

Vo said the progressive tax policy would also help implement many other tasks.

Hidden properties will be more exposed to the public. Real property owners will be reluctant to register their houses under others’ names because of tax duties.

It will also help improve the efficiency of land use. The number of villas has dramatically increased recently, but many of them have been left idle in so-called ‘ghost urban areas’.

Do Duc Dinh from the Socio-Economic Center has agreed to tax second and subsequent houses, but said that it was necessary to think carefully about the tax rates, warning that high taxes will hinder enterprises’ production and business activities.
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