Need a tax covering all kinds of assets

Trillions of dollars from the transfer of real estate are paid into the budget each year. Photo: internet.

The tax policy covers the market

A recent statistic by the National Institute for Finance has shown that the tax system is relatively adequate to regulate the real estate market. Basically, the proceeds cover all three aspects related to the operation of the market.

These are charges when establishing the right to own or use the property and when registering the right to own and use the property (land use levy, land rent, sale of state-owned houses, registration fee); Revenues from the use of assets (agricultural land use tax, non-agricultural land use tax); Revenues when transferring ownership and use rights of assets (enterprise income tax - the transferor is a business establishment), personal income tax (the transferor is a household or an individual).

Over the past years, the policy of regulating income for real estate transfer has been continuously amended and supplemented, especially after the Law on Personal Income Tax in 2007 (Revised in 2012) and the Law on Enterprise Income Tax in 2008 (revised 2013). Policies related to the process of using real estate have also been formed with important reforms that underpin the next steps, such as the development and application of the Law on Non-agricultural land use tax.

Regarding the agricultural land use tax, the subject of agricultural land use tax is land used for agricultural purposes. The basis for calculating land tax is the land area, land grade and the tax rate calculated as the quantity of paddy on a land area.

After more than 14 years of implementation, the Resolution No. 15/2003/QH11 of the National Assembly has met the objectives, requirements, contributing to reducing difficulties, improving living conditions, assisting farmers with more capital to reinvest in agricultural production; ensuring equality in regulating income; contributing to strengthen the state management of agricultural land use.

With the implementation of the agricultural land use tax exemption and reduction policies, since 2003, the revenues from agricultural land use tax have fallen sharply in total budget revenue, always below 0.5%. Prior to 2003, there were years of agricultural land use tax revenue accounting for about 3% of total state budget revenue. For example in 1996, it accounted for 3.05% of Vietnam's total state budget revenue, higher than the revenues from personal income tax at the same time.

Regarding the non-agricultural land use tax, the revenue is relatively stable and contributes to the state budget. The average revenue in the period 2006-2010 is 961 billion VND, accounting for 0.25% of total fees and charges and 2.43% of the total state budget revenue from land; in the period 2011-2016 it increased to 1,433 billion VND, accounting for 0.18% of total fees and charges and 2.36% of total state budget revenue from land.

For revenues from real estate transfer, the tax policy has ensured the principle of taxation on income from land use right transfer, reflecting the true nature of the tax and at the same time it ensures fairness of the tax obligation for organizations, households and individuals.

According to data from the Ministry of Finance, the transfer of real estate is increasing rapidly. In 2009, there were nearly 850 thousand transfers; in 2010 there were over 999 thousand ones; in 2011 over 1 million ones. The revenues of personal income tax from real estate transfers also increased from 2,880 billion VND in 2009 (equivalent to 20.11% of total personal income tax revenue) to 4,472 billion VND in 2011 (equivalent to 11.63% of total personal income tax revenue).

Regarding the collection of land and state-owned rented houses, together with the land allocation with collection of land use fees, leasing land is a form that an organization, household or individual can choose when using land of the State. The land rent is based on land area and land rental rates. The annual rent of land and water surface will be equal to the rented area multiplied by the annual land rent or water surface rent unit, of which the land rental rate is a determinant of the high/ low level of the land rental policy.

After the implementation period, the revenue from land, water surface, sea surface rental and state-owned house sale will increase annually and become one of the important and sustainable sources of revenue in the future.

Taxation focuses on land only

In Vietnam's current state budget revenue structure, there are 6 different revenues for real estate, including taxes, fees and charges. However, only the agricultural land use tax and the non-agricultural land use tax are considered to contain the attributes of "real estate tax" in accordance with the international practice. These are the regular receipts on the value of the property.

Other revenues, such as revenues from the assignment of land use rights, real estate transfer, registration fees, etc., are lump-sum revenue or revenue arising from real estate transactions. Regarding the agricultural land use tax, since 2003, to support farmers, the State has implemented the tax reduction and exemption policies at a large scale; so in fact, the agricultural land use tax policy is almost no longer applicable. At present, basically, there is revenue that has some property tax characteristics. This is non-agricultural land use tax.

The real estate tax is considered fair because it is a form of property tax generally and has a certain correlation with the benefits that the owner receives from the government or local authorities. In big cities of Vietnam, the local authorities are missing opportunities from the rapid increase in land and house values, especially revenues from public investment in basic infrastructure and services

In addition to these points, Vietnam has no tax covering all taxable assets. The system of state budget collection policies related to assets of Vietnam is now discrete and cannot cover all types of assets. The subject of tax is mainly land and properties that are subject to registration fees. There are no tax regulations in the use of houses and other assets. Specifically, Vietnam levied tax on agricultural and non-agricultural land without taxing on architectural works on land (including residential houses and production and business buildings). Therefore, it is necessary to have a tax covering all types of assets that can be taxed in accordance with the current international trend, which is property tax.