Wednesday , February 8 2023

Experts concern about proposed tax on second homes in HCMC


Critics of the plan say it won’t be easy for HCMC to soon tax second homes on a trial basis due to insufficient conditions and potential adverse effects.

The city will not be able to implement the new tax at this time because the real estate market is unstable and there are no specific laws on taxing assets, including land and properties on land, they said.

Tran Minh Hoang, deputy secretary general of the Vietnam Association of Realtors, said that at present, the real estate market is frozen and increasing costs for buyers could result in a panic and sink the market.

Ho Chi Minh City authorities have proposed a trial plan to collect taxes on second properties to create more funds for the municipal budget.

Ho Quoc Tuan, a lecturer at the University of Bristol, said research shows that the key factor affecting housing prices is supply, but in Vietnam supply is not significantly affected by taxes and fees. As a result, the imposition of a property tax will not solve the problem of speculation, he said.

Instead of helping decrease housing prices, the tax may lead to price hikes when supply is at a standstill. If there is a supply shortage, homeowners will increase rents on a large scale and pass the higher taxes on to the selling price of the property in the future, he noted.

“A real estate tax is actually a barrier that makes people with little money unable to compete with people who already own a lot of real estate,” he said.

Le Hoang Chau, chairman of the HCMC Real Estate Association, suggested that the trial proposal should not be implemented until the beginning of 2025, after the real estate market becomes stable in terms of cash flow, liquidity and laws. A law on taxing assets is expected to be adopted in 2024, he added.

Owners of second and more property should not be taxed unless the real estate is designated for trading, rather than living, has a large area and is valued at more than VND2 billion ($83,300) per unit, he said.

Dang Hung Vo, former deputy minister of natural resources and environment, said Vietnam should not mechanically apply foreign models of taxing second housing, as is done in Singapore, because the supply of real estate and prices there have already been standardized in there.

Support

Meanwhile, supporters of the new tax said that the trial proposal should be implemented since the tax will help the real estate market become healthier, developing in a more sustainable way, and that it will be beneficial to most people in HCMC.

Realty expert Le Quoc Kien said that he believes that the tax will have a strong impact on surfing investors, who want to make quick profits of 5-10% after just 1-2 months of trading, discouraging them from buying land and housing and selling them in a short period of time.

The second home tax will not have much of an effect on long-term investors because property price hikes can compensate for higher tax rates. However, property prices do not always increase in the long run, and so the tax will also help reduce some speculation, he said.

Nguyen Khac Quoc Bao, vice rector of the University of Economics HCMC, said the tax will lower the profit rate of owners of housing and land who wait for prices to increase before putting them into use.

Tuan at the University of Bristol said a property tax could provide a source of revenue for local governments to reinvest in infrastructure, and that it also makes sense for high-income earners to contribute more.

Taxing second homes is common practice in many other countries, including the U.S. and China, but Vietnam currently levies no property tax on second properties.

Dang Hung Vo, a former deputy minister of natural resources and environment, estimated since the doi moi (Renewal)economic reforms began in the 1980s, land prices have multiplied 300-400 times.

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