A property tax system based on home value is unfair and not a viable option for the growing real estate market in Vietnam, it is claimed.
As the government works on a new draft law the industry is arguing that a real estate tax system should be based on the area in which properties are built rather than on valuations which are subjective and uncontrolled at present.
There is currently no property tax in Vietnam and one of the main problems is that the real estate market is still relatively new in the country and there is no one reliable source of valuations. Often it can be down to personal opinions rather than the more professional approach taken in mature markets.
The latest proposal from the Finance Ministry is that a property owner would have to pay an annual property tax of 0.03% based on the assessed value of the house, with a tax-free threshold of VND500 million. Owners of more than one house would be taxed on the total value of all the houses.
Finance Minister Vu Van Ninh said the law would help curb property speculation and also benefit many property owners as most houses in the countryside as well as homes under 120 square meters in urban areas would not subject to the new tax because their values based on total construction costs would be less than VND500 million.
Deputy Construction Minister Nguyen Tran Nam said homes should instead be taxed according to the area they are built on and he said it would be unfair if houses taking up hundreds of square meters of valuable land were not taxed more than smaller homes.
Lawyers point out, however, that it would be difficult to assess the real value of homes as proposed in the draft law. The value depends on many factors, including where the property is located and its age and amenities.
Also Dang Hung Vo, a professor at Vietnam National University in Hanoi, said the age of a house and the consumer price index in its locality needed to be taken into consideration when the house is valued. He added that a tax rate of 0.03% would not be enough to keep property prices from soaring, especially in the centers of large cities where houses are also used for commercial purposes and are already very expensive.
There also appears to have been little consideration as to who would be responsible for assessing property values.