Taxing short-term land sales needs to carefully consider market impacts
In the Draft Land Law (amended), the Ministry of Agriculture and Environment proposed many new policies to combat speculation and limit land waste, including high taxes on short-term trading.
Commenting on this issue, Mr. Nguyen Quoc Anh - Deputy General Director of Batdongsan. com. vn said that any market always has a group of speculators and a group of investors. If one group is too superior to the other, the market may suffer both positive and negative impacts.
It is best for investment to account for a larger proportion than speculation but should not be excessively superior. For example, a proportion of 70% investment and 30% speculation can be considered normal" - Mr. Quoc Anh said.
Regarding the proposal to tax short-term real estate trading activities, Mr. Nguyen Quoc Anh said that this is a policy that has been applied by some countries to regulate behavior through personal income tax.
For example, in Japan, if you hold real estate for more than 5 years, the personal income tax rate is about 20%, but if sold 5 years in advance, the tax rate can be up to 39%. The longer you hold real estate, the lower the tax rate, thereby encouraging people to hold real estate longer and find ways to put real estate into use" - Mr. Quoc Anh said.
According to him, Vietnam going in this direction is a reasonable step. However, the issue that needs special attention is the data of the Vietnamese real estate market.
He emphasized that tax policies have a very large impact on consumers, so there is a need for sufficient data to assess the impact before application. Specifically, it is necessary to determine the volume of transactions in the market, how many people hold real estate for less than one year, from 1 - 5 years and over 5 years.
On that basis, if different tax rates are introduced, for example, increasing by 5%, 10% or 15%, it is necessary to specifically assess how these tax rates will affect the market. From there, it is possible to accurately determine the period of holding real estate and the appropriate tax rate, avoiding self-estimating a tax rate and applying it immediately, causing a large level of impact on the market.
Need to clearly define criteria for short-term land purchase and sale
Regarding the criteria for determining short-term real estate transactions, Mr. Le Dinh Chung - General Director of SGO Homes said that it is necessary to apply two criteria at the same time: holding time and transaction volume.
According to him, first of all, it is necessary to determine what a short-term transaction is. It is possible to stipulate a holding period of less than 6 months, less than 12 months or less than 24 months. For each period of time, a different tax rate can be applied. This is a criterion for time.
In addition, it is necessary to consider the number of transactions in a year. For a professional investor, the number of real estate purchases and sales in a year may be a sign to identify short-term investment behavior. For example, if a person transacts the first real estate apartment in a short time, a certain tax rate is applied; but if in the same year they continue to transact the second or third apartment, a different tax rate may be applied.
We can clearly distinguish people who buy real estate to live in but for some reason or difficulty have to resell it. If they only make the first transaction, they cannot be equated with investors with many purchases and sales. Through this, it is possible to clearly identify the signs that this individual is having acts of buying and selling real estate in the short term" - Mr. Chung analyzed.
According to him, the tax rate can be designed in the direction that the more real estate transactions are in the same period of time and are all short-term transactions, the higher the tax rate.
Mr. Le Dinh Chung said that if applied, this policy may affect market sentiment and liquidity in the short term. At the same time, financial consequences may also have a relatively large impact on investors.
In the long term, this policy can help reduce speculation, limit "surfing" and guide investors to use real estate more effectively.
