Finance authority mulls over tax on homes, property

The Ministry of Finance is collecting opinions on levying tax on homes and property as well as amendments to personal income tax.

Existing property-related payment to the state coffers include payments for forming and registering property usage and ownership rights; payments during the process of using property such as tax on usage of agriculture or non-agriculture land; and payments for transfer of property usage and ownership rights.

The ministry’s suggestion is a tax on homes is applied and there should be research on a new law on property tax.

Levying tax on homes, especially the second upward, and propety has been dicussed for years by policy-makers and experts, with many touting it as a critical instrument to tackle speculation. But they noted that market data need to be accurate for fair taxation.

National Assembly Chairman Vuong Dinh Hue in September 2021 suggested the central province of Thanh Hoa to pilot a property tax (housing tax) policy in urban areas. He said the application of a housing tax should be piloted in large urban areas. If the pilot in Thanh Hoa is successful, it could later be applied to Hanoi and Ho Chi Minh City.

In 2018, the Ministry of Finance presented a draft Law on Property Tax to the government, which aimed to regulate high-income groups, improve the efficiency of housing and land use, and preventing loss and waste in the management of public asset, housing and land.

However, the proposal triggered a public backlash and was not approved. Many people believed that if enacted, this tax law would hardly achieve the goal of regulating the income of people with many houses while affecting the poor, who have only one house.

The Ministry of Finance is also seeking opinions on amending the Law on Personal Income Tax and five other tax laws including those on environmental protection tax, import-export tax and natural resource tax. Opinions should be sent to the ministry before mid April.

For the Law on Personal Income Tax (CIT), the ministry asked for an assessment of taxpayers, taxable income, tax-exempt income, tax bases and determination of tax amounts, tax rates, family deductions…

How to calculate PIT is a long-time controversial. Under Resolution 954, starting from July 1, 2020, the government increased the minimum taxable income threshold by 22 percent, from VND9 million ($386) to VND11 million ($472) per month. This means that a person with an income of less than VND11 million per month will be exempted from paying personal income tax.

In addition, the threshold also increased by VND 4.4 million ($189) for each dependent being claimed, meaning the standard for non-taxable income was raised to VND15.4 million ($660) per month (with one dependent) and VND19.8 million ($849) per month (with two dependents).

Many experts have commented that the new VND11 million threshold was “outdated and insensive”, given the high economic growth over the years.

The essence of PIT policy is to regulate high-income earners to minimize income disparity, narrowing the gap between the rich and the poor and to consolidate budget revenues. But the current PIT calculation method does not meet this requirement, they said.