Deputy Dang Hong Sy from Binh Thuan raised a question to Phoc about the legal documents on preventing losses to the state budget collection with respect to the real estate trading issued by the Ministry of Finance (MoF) and General Department of Taxation. 

He said voters have complained that state officials in many localities harass people and cause troubles when people follow procedures to transfer real estate.

Dispatch circular, decree and law?

The issuance of dispatches (Document No 14257/BTC-VP dated December 15, 2021; and Document No 438/BTC-VP dated January 12, 2022) by MOF which aims at preventing losses in state budget collection is within the competence of the ministry.

However, the question is why MOF still has to issue such documents once the regulations on tax collection in real estate transfer activities are clearly stipulated in the legal framework, which already comprises the tax law, Decree 12, Decree 65 and Circular 92.

Circular 92/2015/TT-BTC dated June 15, 2015 says that when transferring real estate, people who transfer are subject to 2 percent income tax, while transferees are subject to 0.5 percent registration fee. The taxable prices are shown in the contracts.

If the prices of real estate are not shown in the contracts, or the prices shown in the contracts are lower than that in the land frames set by local authorities, taxable prices will be the ones in the land frames set by local authorities (Article 17).

The Decree 12/2012/ND-CP dated February 12, 2015 also shows similar content (Article 18).

The clear and specific regulations have created a reasonable legal framework which tax officers and people have been following for many years.

Minister Phoc said that under the Land Law, the land price frames are set by provincial people’s committees once every five years. It is legal to use land prices, land unit prices and coefficient to calculate taxes. 

Do the dispatches issued by the ministry and taxation body have higher validity than the above law, decree and circulars?

Since the day the dispatches were released, taxation bodies and relevant agencies have kept people’s dossiers for real estate transfer longer than previously.

Local newspapers cited GDT’s report as saying that since the beginning of the year, 85,000 real estate dossiers have to be re-declared, while the additional tax revenue is VND222 billion. The figure is 13,100 dossiers in HCM City, 500 in Long An and 12,000 in Vung Tau.

Answering the inquiries of the National Assembly deputies, Phoc said he instructed the General Department of Taxation General Director to follow the post-examination mechanism, not pre-examination. However, as dossiers have been kept by agencies for so long, people have every reason to believe that the pre-examination is being applied. 

Meanwhile, pre-examination has been shown as unfeasible, which is contrary to the principle in state management which says post-examination needs to be applied to avoid inconvenience for people.

There are many problems in the real estate market. In order to develop the market and collect tax in a more reasonable way, it is necessary for local authorities to set up a framework of land prices that are closer to market prices. Under current regulations, local authorities only adjust the land price once every five years and the land prices are set at low levels. 

Developing a healthy market 

The resolution of the 13th Party Congress points out that land valuation is not in accordance with market rules and doesn’t reflect reality; the valuation of land and real estate, the transfer of land and shifting of land use purposes are not implemented in a transparent way; while the loss of resources from urban land remains high. The urban housing policy is not comprehensive and reasonable, and the development of housing products still cannot meet requirements.

The tax collection from land just makes up 0.07 percent of GDP, which is 10 times lower than that of developing countries and 30 times lower than the average level of OECD countries.

The Minister of Finance, with the function, task and rights assigned to him, needs to propose amendment of regulations to realize the Party’s guidelines. If so, 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 inspection to find some fraudulent cases, they may scare people. If so, tax collections may increase in the short term, but this is not good for the long-term healthy development of the market.

Tu Giang