» » Housing tax law will not affect real estate prices

Vincom City Towers, originally uploaded by Kiva.Dang.
Member of the National Assembly’s Economics Committee Nguyen Duc Kien believes that the housing tax law will not lead to price increases in the real estate market, while it will help the state better control the market.

According to the Ministry of Finance’s latest draft, only the houses worth more than 600 million dong will be taxed, while the taxable value per square metre will be calculated as 50 percent of the construction cost of one square metre of a house of the same kind. The ministry believes that if the draft document is approved, the majority of existing houses will not be taxed.

However, Dr Nguyen Minh Phong, senior economist from the Hanoi Socio-economic Development Institute, does not think that it is the best solution to calculate housing tax based on houses’ values.

“Who will decide that that house is valued at 600 million dong, and this house is worth less than 600 million dong?” he questioned.

He went on to say that in order to collect tax, the state will have to appraise houses at high price levels, while high land price levels will cause difficulties for site clearance.

Phong also said that the suggested imposition of the aggressive tax based on house values will prompt people to build one-storey houses with low costs, which means that Vietnam will never have modern high-rise buildings.

However, Dr Nguyen Duc Kien advocates the plan put forward by the Ministry of Finance, believing that the calculation method benefits people.

“If the taxable value is just 50 percent of the production cost, people will benefit,” Kien said, agreeing on the suggested tax rates on land.

Meanwhile, both Phong and Kien affirm that the real estate market will bear no influence if the suggested ideas are approved.

“With the tentative tax rate of 0.03 percent, a 200 square metre house in the ‘golden land’ area of Hanoi in Hang Dao street will bear the tax of 3 million dong per annum, which is really a small sum if compared to its value,” Kien said. The land price of the Hang Dao street area is now defined at 54 million dong per square metre by the Hanoi People’s Committee.

According to Kien, while imposing low tax rates, the most important goal of the housing tax is not to collect tax, but to bring the real estate market into order.

Meanwhile, Dang Hung Vo, real estate expert, former Deputy Minister of Natural Resources and the Environment, said that the draft law needs to differentiate between the tax rates on houses used as accommodations and houses used for commercial purposes. Moreover, those who have many houses and lease the houses to others need to pay tax rates different from those who have many houses and leave the houses idle.

Le Hoang Chau, Chairman of the HCM City Real Estate Association, said that in order to prevent speculation, it is necessary to tax second and third houses, even though they are valued 300 million dong only, instead of taxing only additional houses worth over 600 million dong.

Real estate trading corporations in HCM City all believe that the imposition of 0.03 percent on the houses valued at over 600 million dong will not affect the land and house prices on the market, since the tax rate is small if compared to the values of houses which are increasing year after year, especially houses in ‘hot’ areas.

Commenting about the draft law, Tran Minh Hoang, General Director of Vinaland, said that the bill is expected to be applied to all people, not just focus on traders. Therefore, the bill will not have the function of preventing land and house speculation.

Source: DTCK

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