Land, house taxes may be used for infrastructure

Land is a national resource that can be used to fund infrastructure projects, at a time when public investment for such projects is declining.
Speaking at a conference about using real estate funds to support infrastructure development held in Hanoi yesterday, director of the Finance Ministry’s Institute of Financial Strategy and Policy Vu Nhu Thang said infrastructure investment accounted for 9.2 per cent of GDP over the last five years, but funding for next year would be lowered to 180 trillion c (US$8.5 billion) or 6.5 per cent of GDP.

According to Thang, land taxes and fees have been a major source of income for the State and it was time for Vietnam to think about other ways to better take advantage of real estate.

Pham Sy Liem, director of the Institute for Urban Studies & Infrastructure Development, said Vietnam had yet to impose house and land taxes, which is an important feature of taxation in countries with high urban populations, and suggested having a different tax rates for different sized houses.

Such a tax would help maintain and build public infrastructure and public goods such as pavement, trees and street lights, Liem said.

“It’s the public infrastructure that adds value to the surrounding land and property,” he said, using property values along the national highway as an example.

He also said instating a fee for developing social infrastructure such as schools and hospitals would also help infrastructure development.

Among the top three state income earners last year, nearly 1.4 trillion dong ($66.6 million) was from land tax, about 50 trillion dong ($2.4 million) from land-use fees and 3 trillion dong ($142.6 million) from land lease fees.

Head of the ministry’s Bureau of Public Property Management Pham Dinh Cuong said land-use fees, which accounted for 90 per cent of land-related income, were often fixed for long periods, so land lease fees were a more flexible option for the 500,000 enterprises renting land.

The Government could reclaim leased land easier if the land was under planning for projects without paying compensation or arranging resettlement.

He noted land clearance and compensation payments were a bottleneck for most infrastructure projects despite.

However, Cuong said that it would be difficult to raise land lease fees with the current pressures of inflation.

He also recommended mobilising money from beneficiaries of infrastructure projects to help fix infrastructure in need of repair, which could be handed to the Government.

Conference participants also discussed the establishment of “clean” land banking that provides data about areas available for the development of new projects where investors did not have to worry about land clearance or compensation, which would streamline the process.

Vietnam News

Tags: Vietnam Property market, Vietnam property sector, vietnam real estate market