The 0.4% tax was proposed last week by the Ministry of Finance, which claims it will add VND31 trillion to the state coffers each year and help Vietnam “get in line with regulations on property tax in other countries.
“The proposed law is aimed at high income groups to combat land speculation and to ensure that land and house owners will actually use their properties,” said finance minister Dinh Tien Dung on April 20.
Low income people will not be affected by the proposed bill, and financial transparency in property management will be guaranteed, Dung said.
The objective is to restructure and expand budget revenue while also reducing spending, the minister said.
But experts said low income earners will also be hit because most property in Vietnam is already worth more than the proposed threshold.
In Ho Chi Minh City alone, 95% 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.
The Ministry of Finance collected VND120 trillion in land and housing related fees and taxes last year.
Land use tax accounts for the largest proportion of state income, about 6.6%. It has been increasing every year, from VND45.1 trillion in 2015 to VND79.5 trillion in 2017.