Tax collection, land market issues addressed by finance minister
Binh Thuan MP Dang Hong Sy asked Phoc about the legal documents on prevention of losses in state budget collection with respect to real estate business issued by the Ministry of Finance (MoF) and the General Tax Department.
He said voters have complained that state officials in many localities are harassing people and causing trouble when people go through real estate transfer procedures.
Shipping circular, decree and law?
The issuance of dispatches (Document No. 14257/BTC-VP of December 15, 2021; and Document No. 438/BTC-VP of January 12, 2022) by the MOF which aims to prevent losses in the collection of the budget of the State falls under the jurisdiction of the Ministry.
However, the question is why the MOF still has to issue such documents once the regulations on tax collection in real estate transfer business are clearly stipulated in the legal framework, which already includes the tax law, the decree 12, decree 65 and circular 92.
Circular 92/2015/TT-BTC dated June 15, 2015 stipulates that when transferring real estate, transferees are subject to a 2% income tax, while transferees are subject to transfer fees. 0.5% recording. The taxable prices are indicated in the contracts.
If the prices of the real estate do not appear in the contracts, or if the prices appearing in the contracts are lower than those of the land plots fixed by the local authorities, the taxable prices will be those of the land plots fixed by the local authorities (article 17 ).
Decree 12/2012/ND-CP of February 12, 2015 also shows similar content (article 18).
The clear and specific regulations have created a reasonable legal framework that tax officials and citizens have followed for many years.
Minister Phoc said that under the Land Law, land price frameworks are set by provincial people’s committees once every five years. It is legal to use land prices, land unit prices and the coefficient to calculate taxes.
Do the dispatches issued by the ministry and the tax body have a validity superior to the law, the decree and the circulars above?
Since the day the dispatches were published, the tax authorities and relevant agencies have kept people’s records for the real estate transfer longer than before.
Local newspapers quoted GDT’s report as saying that since the beginning of the year, 85,000 real estate files have to be re-declared, while the additional tax revenue amounts to 222 billion VND. The figure is 13,100 cases in Ho Chi Minh City, 500 in Long An and 12,000 in Vung Tau.
Responding to questions from National Assembly deputies, Phoc said he had instructed the director general of the General Department of Taxation to follow the post-examination mechanism, not the pre-examination. However, since the records have been kept for so long by the agencies, people have every reason to believe that the screening is being applied.
Meanwhile, prior review has been found to be unworkable, which is contrary to the principle of state management that post review should be applied to avoid inconvenience to people.
There are many problems in the real estate market. To develop the market and collect taxes more reasonably, local authorities need to set up a framework for land prices that is closer to market prices. Under current regulations, local authorities only adjust land prices once every five years and land prices are set at low levels.
Develop a healthy market
The resolution of the 13th Party Congress points out that the property assessment does not conform to the rules of the market and does not reflect reality; land and property valuation, land transfer and land use change are not implemented in a transparent manner; while the loss of urban land resources remains high. The urban housing policy is not comprehensive and reasonable, and the development of housing products still cannot meet the needs.
Property tax collection is only 0.07% of GDP, which is 10 times lower than in developing countries and 30 times lower than the average level in OECD countries.
The Minister of Finance, with the function, the task and the rights assigned to him, must propose a modification of the regulations to carry out the orientations of the Party. If this is the case, the real estate market in particular and land resources in general will become an important resource, capitalized for the development of the country.
If state agencies only focus on tightening inspections to catch certain fraudulent cases, they can scare people away. If so, tax revenue may increase in the short term, but it is not good for the long-term healthy development of the market.