Revenues from land and real estate always contribute significantly to the state budget, especially local budgets. This source of revenue can meet the principle of benefits of public services, such as transportation, education, health and environment. Nevertheless, in recent years, this principle has not been fully focused on and there has not been a consistent policy.
Uneven revenues
Revenues from land in state and local budgets reduce as agricultural land use taxes are exempted under Resolution 55/2010/QH 12. Non-agricultural land use tax (coming into effect from 1 January 2012) which replaces the former property tax is not the main objective to increase budget revenue. In addition, revenues from the sale of state-owned houses are also added to the revenues from land. Statistics show that in recent years, revenues from land tend to increase, especially after applying the Land Law with more specific provisions on land prices. However, the proportion of income from land in the state budget has never exceeded 9 percent of total revenue.
In specific distribution, revenues from land depend largely on the income from licensing land use rights (the source arising once in a long time). This shows that the state budget revenue is not sustainable because in the long term, the revenue from land allocation will sharply decrease when most of land is allocated to the users. On average, revenue from land allocation accounts for 83.7 percent of total state budget revenue from land. The difference in the ratio of land allocation revenue to total revenue from land in different localities remains large.
According to Dr Vu Sy Cuong, Institute of Strategy and Policy on Finance (Ministry of Finance), the current state budget revenue from land is allocated to localities and the role of this revenue should be reconsidered carefully. Mr Cuong analysed that the rate of income from land in state budget fluctuates differently in various localities. On average, it accounts for 8 percent of the total expenditures of local budget. The different gap between various localities is big. In reality, in the poor provinces such as Dien Bien, Lai Chau or Bac Kan, the revenue from land accounts for a small percentage, just over 1 percent, while it is quite big in cities like Hanoi, Da Nang or Ho Chi Minh city (with the highest is 22.6 percent of local budget).
Calculating the benefits
When comparing tax revenues from land to local public services, Mr Cuong said that, there is no statistical relation between the revenues and the provided public services. This means that the principle of “benefits” has not been focused so it is difficult to reach consensus when applying tax on real estate as well as evaluate the benefits of land users when they fulfil their obligation to the country.
Although the application of the non-agricultural land use tax can improve the situation, he is of the opinion that it’s should be examined carefully when applying this taxes in practice. He recommends that the mechanism of state budget revenue from land should be complied with the principle of “benefits”, of which, revenues from land should be used for the improvement of local infrastructure and public service quality. In the long term, it’s necessary to develop tax policies that allow localities to self-determine taxation within certain limitations.
Mr Cuong emphasizes that it should be calculated carefully to replace the mechanism of one time collecting land allocation tax by collecting several times with one subject (household).
Also, it is difficult for people to pay a large amount of money at one time to have the land use certificate; and the localities may use their money wastefully when having big revenue collected in short term. Public works need sources for regular maintenance, not to be left downgraded and ineffectively used.
Trinh Hai
Vietnamese
