“At best, the roadmap for implementing real estate tax reform will take up to 20 years.”
What do countries that are applying real estate tax have in common, Professor?
- In general, in developed countries, workers have high incomes, and housing costs are included in their salaries. Furthermore, and also very importantly, these countries all have a complete, comprehensive, timely updated real estate database system, based on a digital platform. Tax management will be simple, accurate and not "confused" because there may be a lot of data that makes it difficult to operate. Management agencies can know exactly how much real estate Mr. A or Mr. B owns in the whole country, what type, and what the total value is. There is no ambiguity about taxable objects. The bigger issue is to innovate thinking in resolving the fierce conflict between "protecting the secret" of property privacy and the requirement for public disclosure and transparency of property to prevent and combat corruption.
Is the current context of Vietnam suitable for implementing real estate tax, sir?
- Tax is a tool to regulate the market. But tax policy needs a specific roadmap that is carefully calculated, absolutely avoiding jerky behavior. Suddenly changing from one state to another will shock the economy and the whole social consensus. It is like a car that if you turn the steering wheel suddenly, it is easy to overturn. As our ancestors used to say, "haste makes waste".
The story in Vietnam is even more complicated, so we need to be very careful in choosing the real estate tax roadmap. The income level of Vietnamese workers is low, and it is also a policy to attract FDI investment. In wages and salaries, the cost of accommodation is almost invisible.
In particular, at present, our infrastructure for real estate management, income, and consumption is still too poor, unable to keep up with production and business forms based on technical advances.
For example, it is very difficult to determine whether a property is really owned by Mr. A or Mr. B, or is just registered under a household name. Therefore, a sliding tax on the subject will inevitably occur. Therefore, research on the feasibility of a real estate tax is considered the focus. Not to mention how the issue of property privacy is handled.
So the roadmap for applying real estate tax in our country to create efficiency without virtual prices also needs time, at most 20 years.
In fact, not everyone who owns a lot of real estate is speculating, for example, buying a house to develop production, do business directly or rent out… is economically effective. So how can we tax real estate “on target”, Professor?
- It must be affirmed that the mindset that owning many real estates is subject to high taxes is wrong. Resolution 18 of 2020 of the Party Central Committee clearly stated that real estate tax is aimed at preventing speculation, targeting abandoned real estates, causing waste. Tax reform does not mean increasing taxes. Some subjects must increase taxes to curb waste, but some subjects must be exempted or reduced taxes such as using real estate for key purposes identified by the state.
On the contrary, real estate belongs to the capital market sector, only with it can we develop the production of goods. High taxes on these real estates will make the price of goods produced in Vietnam higher than in other countries, and thus the competitiveness of our economy will decrease.
On the other hand, housing plays a role in social security for people, high taxes on housing for the wrong subjects can hinder social security policies. In fact, inappropriate tax rates will not encourage the development of the rental housing segment, making it difficult to develop affordable housing. Researching how to tax real estate so that it does not overlap with other taxes is also a point to pay attention to.
Don't add more burden to "people who have just recovered from illness"
Many people expect property taxes to help reduce housing prices. What is your opinion, Professor?
- Real estate prices in the world always tend to increase. The increase is often greater than the inflation rate. The reason is that land resources have a fixed supply while the demand for land for economic development is increasing, the population is increasing. So the trend of real estate prices increasing higher than the currency depreciation rate is in accordance with the law.
Determining a reasonable land price is not difficult. The land price must reflect the profit from using the land for about 70 years, the price can increase higher when seeing the expected profits in the future. The land price on the market can be much higher than the price calculated based on the land rent for 70 years. This higher part is an imaginary price, not corresponding to any profit from the land rent.
It is incorrect to say in general that the expectation that real estate tax will help reduce housing prices is incorrect, this tax only reduces the virtual price that is formed.
For the economy, if there is no careful preparation and no suitable roadmap, what impact will real estate taxation have, Professor?
- Real estate is a very sensitive field. Fluctuations in the real estate market will have a quick and immediate impact on the macro economy, which means it will immediately affect the financial market, causing instability in the economy. Therefore, real estate tax must be carefully studied, a suitable roadmap must be determined, along with careful preparation of solutions to upgrade management infrastructure, and policies to change the application of property privacy rights.
China’s economy has been in recession after the country tightened its grip on real estate, forcing the government to “turn around” and change its management policies. According to the Professor, what lessons can we learn from China?
- What we learn from China's policy is that solutions must have a careful roadmap, and drastic changes must also have limits in application. Real estate stagnation will cause many related manufacturing and business sectors to "stand still".
After COVID-19, the economy in general and the real estate market in particular are like a body that has just recovered from a serious illness. Currently, geopolitical conflicts are causing regional wars, making it difficult for the world economy to recover. Vietnam's open economy is also strongly affected. In this context, the reform of real estate tax must be carefully calculated, not making it difficult to recover the economy. We should not think hastily and end up "giving up the bowl and leaving the tray".
Thank you, Professor!
