Trillions of dong lost due to loopholes in land price declaration

Mr. Thai Minh Giao, Deputy Director of the HCM City Tax Department informs the real estate transfer activities. Photo: N.H

Speaking at the opening of the seminar, Mr. Ha Khac Minh, Editor-in-Chief of Corporate Finance Magazine, said in countries around the world, revenue from tax on land and properties attached to land always accounts for 50-90% of total revenue for the local budget. This revenue was the main source for local development, especially in urban areas.

On the other hand, land-related taxes not only have the function of generating revenue for the budget but also were a financial tool to regulate the real estate market, as well as a policy to regulate urban development. These were effective tools to adjust in case of land price fever, preventing speculation on land hoarding and controlling spontaneous migration into urban areas.

However, from the perspective of tax authorities, Mr. Thai Minh Giao, Deputy Director of the HCM City Tax Department, said that real estate transfer activities are taking place actively throughout the country in general and HCM City in particular. However, in fact, there were many cases where taxpayers declared the purchase price as lower than the actual transfer price in order to evade tax when transferring real estate, they have not voluntarily declared the actual transaction price.

Meanwhile, the determination of the actual price of house and land purchase and sale transactions on the market has not yet provided specific guidelines to serve as a basis for determining personal income tax and registration fees. This causes many difficulties for tax authorities and tax officers in the identification of the actual transaction price of each dossier.

Mr. Le Hoang Chau, Chairman of HCM City Real Estate Association also admitted that, in fact, there was a situation of low price declaration in real estate transfer. In HCM City, there are about 30,000 cases of having to review the declaration of real estate transfer prices.

However, Mr. Chau also noted that, in reality, there were cases where real estate was transferred at a price lower than the market price for some specific reasons. Therefore, Mr. Chau suggested that the tax sector needed to be "sensible" during the review process.

The determination of land value is also the reason why the progress of equitization and divestment of State enterprises has been delayed in recent years. Mr. Dang Quyet Tien, Director of the Department of Corporate Finance, Ministry of Finance, said that the difference between the price of State land and the market price has caused a loss of state capital of thousands of billions of dong during the process of equitization and divestment.

According to the Ministry of Finance, in Hanoi, HCM City and other provinces and cities, when allocating or leasing land that the State recovers due to rearrangement and handling of offices, non-business establishments whose properties are attached to the land owned by the State, they have not conducted auctions of land use rights without the consent of the Prime Minister. Meanwhile, mechanisms and policies do not specify the method of determining land prices to ensure transparency and closeness to market prices.

Therefore, many projects that change land use purposes when determining the land price is not close to the market price, causing a loss of revenue for the state budget. The determination of land prices to collect land use levy and land rent is mainly based on the results of the consulting business, but it is incomplete and not close to the market price.

Determination of land price to take a basis for collection of land use levy and land rent in some localities has not yet fully followed the prescribed order and procedures. The People's Committees of provinces and cities have approved land prices as a basis for collecting land-use fees, but have not consulted the standing People's Councils and have not reported to the People's Councils of provinces and cities.

The above violations and loopholes have led to a loss of the State budget and created opportunities for speculation and profiteering activities; distorting the business environment and fair competition of the market.

Ms. Nguyen Thi Cuc, former Deputy Director of the General Department of Taxation, and Chairwoman of the Vietnam Tax Advisory Association, said that it was necessary to summarize and evaluate the overall situation of implementing the current regulatory policy related to houses, land and real estate.

On that basis, researching to complete following the objectives of the tax reform strategy to 2030 approved by the Prime Minister in Decision No. 508/QD-TTg dated April 23, 2022 in the direction of increasing the regulation level for land and supplementing on collecting taxes for houses in order to encourage effective use of houses and land, contribute to limiting speculation on houses and land, and ensure a reasonable and stable source of revenue for the state budget.