Vietnam is considering imposing a new tax on people who own property worth VND700 million ($30,700) or more.
The 0.4 percent tax has been proposed by the Ministry of Finance, which claims it will bring in VND31 trillion ($1.3 billion) per year and help Vietnam “get in line with regulations on property tax rates in other countries.”
However, experts have expressed their concerns about the idea.
The new tax will be a burden on property owners, who already have to pay land use tax from 10 to 50 percent of their property’s value, said Le Hoang Chau, chairman of the HCMC Real Estate Association.
It will also inflate house prices and have a negative impact on the market, Chau added.
In Ho Chi Minh City alone, 95 percent of properties are worth VND700 million or more, so the majority of homeowners will be hit by the tax, said Tran Khanh Quang, CEO of Viet An Hoa Real Estate Investment JSC.
“When unexpected moves like this hit the market, negative reactions can occur. However, it is still too early to predict the future,” Quang said. He added that in the long-term, it could create potential risks for real estate investors.
Many Vietnamese people buy properties to lease them out, but if the law is approved, people will have to think hard before they buy due to the new tax, said Nguyen Quoc Hiep, CEO of GP Invest.
The resulting reluctance to invest will result in a slow real estate market, which currently accounts for 11 to 12 percent of GDP each year, Hiep added.
Many countries have a similar tax known as the millage rate, a figure representing the amount per $1,000 of the assessed value of property, said Pham Sy Liem, former vice minister of Construction.
However, there should be a more accurate way of calculating which properties should be taxed so that lower income people won’t have to pay too much, Liem said.
“We are aware that this could affect people who have high-value property but limited incomes,” said Pham Dinh Thi, director of the Tax Policy Department under the Ministry of Finance.
To address this issue, an article will be added to the bill to allow people to defer their tax payments until as and when they sell the property, said Thi.
The ministry is planning to send its proposal to other departments for feedback, but it has already been met with public disapproval.
“I am already paying back a bank loan for my apartment. Now this tax!” said a VnExpress reader.
“What ‘other countries’ is the Ministry of Finance trying to get in line with? And do we have the same social welfare as them?” another reader questioned.