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1
Dissertation
Effects of tightening monetary policy on recent downturn of
Vietnamese real estate: The tax policy
Table of Content
List of Figures 1
List of Table 4
Table of Content .................................................................................................................................. 1
Chapter 1. Introduction .................................................................................................................. 5
1.1 Research Background .................................................................................................. 5
1.2 Research aims and individual objectives ..................................................................... 6
1.3 Research questions ....................................................................................................... 7
1.4 Significance of study.................................................................................................... 7
1.5 Outline structure........................................................................................................... 8
Chapter 2. Literature Review......................................................................................................... 9
2.1 Real estate market ........................................................................................................ 9
2.1.1 Definition of real estate .................................................................................................. 9
2.1.2 Definition of real estate market...................................................................................... 9
2.1.3 Characteristics of real estate market .............................................................................. 9
2.2 Tax policy in real estate market ................................................................................... 9
2.2.1 Definition of real estate tax ............................................................................................ 9
2.2.2 Characteristics of real estate tax .................................................................................... 9
2.2.3 Tax policy in real estate market ..................................................................................... 9
2.3 Impacts of tax policy on real estate market ................................................................. 9
2.3.1 Impacts of tax on total land fund ................................................................................... 9
2.3.2 Impacts of the tax on real estate goods ........................................................................ 10
2.3.3 Tax on the inheritance and the gift: ............................................................................. 12
2.3.4 Practices of tax policy for real estate market ............................................................... 12
2.4 Summary .................................................................................................................... 12
Chapter 3. Methodology .............................................................................................................. 13
3.1 Data collection ........................................................................................................... 13
3.2 Data analysis .............................................................................................................. 13
3.3 Research Design......................................................................................................... 13
3.3.1 Research model ........................................................................................................... 13
3.3.2 Surveys and research data ............................................................................................ 13
3.4 Research Approach .................................................................................................... 13
3.4.1 Develop a decision tree model ..................................................................................... 13
Chapter 4. Results and Discussion .............................................................................................. 14
4.1 Assessment of tax policy towards Vietnamese real estate market ............................. 14
4.1.1 Advantages of tax policy ............................................................................................. 14
4.1.2 Disadvantages of tax policy ......................................................................................... 14
4.1.3 Causes of limitations in the tax policy for Vietnamese real estate development......... 14
4.2 Impact of tax policy on Vietnamese real estate market ............................................. 14
4.2.1 Sample description ....................................................................................................... 14
4.2.2 Descriptive statistics .................................................................................................... 14
4.2.3 Research model construction ....................................................................................... 14
4.2.4 Testing research model ................................................................................................ 14
Chapter 5. Conclusion ................................................................................................................. 15
Refernces 17
Chapter 6. Appendix .................................................................... Error! Bookmark not defined.
6.1 Appendix 1 ................................................................. Error! Bookmark not defined.
6.2 Appendix 2 ................................................................. Error! Bookmark not defined.
3
List of Figures
Figure 2-1 Inelastic impacts of unit tax on land supply curve .............................................. 9
Figure 2-2 Inelastic impacts of proportional tax on land supply curve ............................ 10
Figure 2-3 Impacts of unit tax on the price of real estate X ................................................ 10
Figure 2-4 Impacts of proportional tax on price of real estate X ........................................ 11
Figure 2-5 Perfectly inelastic impacts of unit tax on demand curve for X ......................... 11
Figure 2-6 Perfectly inelastic impacts of proportional tax on demand curve for X ............ 11
Figure 2-7 Perfectly elastic impacts of unit tax on demand curve for X ............................ 12
Figure 2-8 Perfectly elastic impacts of proportional tax on demand curve for X ............... 12
Figure 9 Research model ..................................................................................................... 13
Figure 4-1 Total real estate revenue in total national budget through years ............... Error!
Bookmark not defined.
Figure 4-2 Revenues from real estate through years ........... Error! Bookmark not defined.
Figure 12 Relative importance of variables ........................ Error! Bookmark not defined.
List of Table
Table 2-1 Overview about selected countries ..................... Error! Bookmark not defined.
Table 4-1 Proportion of tax rate (%) in OECD zone ......... Error! Bookmark not defined.
Table 4-2 Effectiveness of real estate tax policies ............. Error! Bookmark not defined.
Table 4-3 Evaluation of land policies ................................. Error! Bookmark not defined.
Table 4-4 Sample description ............................................. Error! Bookmark not defined.
Table 4-5 Critical level of factors ....................................... Error! Bookmark not defined.
Table 4-6 Overall Importance of Variables ........................ Error! Bookmark not defined.
Table 4-7 Results of the regression model .......................... Error! Bookmark not defined.
Table 4-8 Details of “quality” and “position” ..................... Error! Bookmark not defined.
Table 4-9 Summary of “quality” and “position” ................ Error! Bookmark not defined.
Table 4-10 Determining reliability coefficient Cronbach’s AlphaError! Bookmark not
defined.
Table 4-11 KMO and Bartlett's Test/ independent vảiables Error! Bookmark not defined.
Table 4-12 Model Summary ............................................... Error! Bookmark not defined.
5
Chapter 1. Introduction
1.1 Research Background
The real estate market is an important market in the economy of each country (Srivatsa
and Lee, 2012). This is a special market not only have a major influence on the economy
development but also on the social life (Zheng et al., 2012). Additionally, literature has
shown that real estate market has a close relationship to other markets such as financial
markets, monetary and broad impact on all segments of the population (Kaklauskas et al.,
2011; Igan, 2012; Xu and Chen, 2012; Goukasian and Majbouri, 2010; Bredin et al., 2011).
Recently, Vietnamese real estate market has contributed significantly to the economic growth
(McCluskey and Trinh, 2013). Moreover, the property market has attracted many investments
from both domestic and international developers; and thus, stimulus the urban developement
as well as gradually improves people's housing needs (Markussen et al., 2011). Through the
operation of the property market, the legal system, which governs the market operation, has
been significantly improving (Han and Vu, 2008). However, McCluskey and Trinh (2013)
indicate that along with the positive effects, the Vietnam real estate market has revealed
many shortcomings developing economically unhealthy and unsustainable sector. It is
spontaneous development (Markussen et al., 2011), lack of transparency (Han and Vu, 2008)
and non-official transactions (Truong and Perera, 2011), which are still accounting for a high
proportion. Moreover, Endres et al. (2010) reports that real estate supply and demand in
Vietnam are imbalance, especially on the housing needs in addition with the fact that state
speculation enables the "virtual" market to raise real estate prices making erratic movements.
Although there are many reasons, which cause this recent circumstance in Vietnam, it is
important to note that real estate-related tax policies applied in Vietnam are inadequate and
not shown taxation regulatory role oin the economy market economy (McCluskey and Trinh,
2013). Therefore, it is a need to improve the macroeconomic policies, including fiscal policy
lean especially tax policy in particular for overcoming the mentioned problems in order to
develop the strong real estate market.
The dissertation titled “Effects of tightening monetary policy on recent downturn of
Vietnamese real estate: The tax policy” is proposed to study the relationship between tax
policy and the development of the property market in Vietnam, forming the tax system on the
development of the sustainable real estate market as well as promoting the efficient use of
land, increased contribution to the government financial revenues.
1.2 Research aims and individual objectives
The main aim of this project is to innovate and improve tax policies in purpose of
developing the Vietnamese property market toward healthy, sustainable contribution for the
process of the country industrialization and modernization.
To achieve the above objectives, the thesis is focused on following specific objectives:
To study the basis of the theory of tax policy and the specific taxes related to the
property market.
To examine the current international practice of tax policy for development of the
property market in the world and draw lessons for Vietnam.
To provide analysis and assessment of the state of tax policy and tax specific to the
Vietnamese real estate market development in recent years.
To propose innovative solutions and improve tax policies aimed at developing the
real estate market in Vietnam.
7
1.3 Research questions
To achieve the above research, the content of the thesis focuses on answering following
research questions:
How tax policy and tax related particular influence to the real estate market, in
theory?
Can tax policy and the specific taxes currently applied in Vietnam affect the
property market development?
What are causes that led to the existing tax policy, restrictions on development of
the real estate market?
How tax policy for the Vietnamese real estate market can be renewed and
completed?
1.4 Significance of study
Thesis has new scientific and practical contributions as follows:
To study the theory and the real estate market and tax policy for development of
the property market as a whole, inclusive, which clarify the effects, the impact of
tax policy on the development of the property market. This is an important
theoretical issue, particularly in the process-oriented research to innovate and
improve tax policies for the real estate market development in Vietnam.
Analysis and evaluation of systematic tax policies for development of the property
market and other revenues of the property concerned should state on the basis of
reliable secondary data sources collected from the Ministry of Natural, the General
Department of Taxation, Department of Statistics, IMF, World Bank and the
primary data collected through the survey process. Thesis has drawn the results,
the surface is limited and especially the cause of the limited development of tax
policy for the real estate market in Vietnam.
On the basis of the general study of the tax policy application in real estate market
of some countries. The thesis draws lessons about innovation and effective tax
policy for research and application in accordance with the conditions of Vietnam.
1.5 Outline structure
Besides the introduction, conclusion and reference list, the main contents of the study
consist of 5 chapters as follows:
Chapter 1: Overview about the dissertation
Chapter 2: General theory the real estate market and tax policy for the real estate market
development as well as review on tax policy for real estate market in some countries and
experience for Vietnam
Chapter 3: Present the research methodology in order to achieve the study purpose
Chapter 4: Demonstrate the study results and discussion on issues related to tax policies in
Vietnam real estate market.
Chapter 5: Conclude observations and achievement throughout the study as well as the
proposal of orientation and some solutions.
9
Chapter 2. Literature Review
2.1 Real estate market
2.1.1 Definition of real estate
2.1.2 Definition of real estate market
2.1.3 Characteristics of real estate market
2.2 Tax policy in real estate market
2.2.1 Definition of real estate tax
2.2.2 Characteristics of real estate tax
2.2.3 Tax policy in real estate market
2.3 Impacts of tax policy on real estate market
2.3.1 Impacts of tax on total land fund
Figure 2-1 Inelastic impacts of unit tax on land supply curve
Figure 2-2 Inelastic impacts of proportional tax on land supply curve
2.3.2 Impacts of the tax on real estate goods
Figure 2-3 Impacts of unit tax on the price of real estate X
11
Figure 2-4 Impacts of proportional tax on price of real estate X
Figure 2-5 Perfectly inelastic impacts of unit tax on demand curve for X
Figure 2-6 Perfectly inelastic impacts of proportional tax on demand curve for X
Figure 2-7 Perfectly elastic impacts of unit tax on demand curve for X
Figure 2-8 Perfectly elastic impacts of proportional tax on demand curve for X
2.3.3 Tax on the inheritance and the gift:
2.3.4 Practices of tax policy for real estate market
2.4 Summary
13
Chapter 3. Methodology
3.1 Data collection
3.2 Data analysis
3.3 Research Design
3.3.1 Research model
Figure 9 Research model
3.3.2 Surveys and research data
3.4 Research Approach
3.4.1 Develop a decision tree model
Chapter 4. Results and Discussion
4.1 Assessment of tax policy towards Vietnamese real estate market
4.1.1 Advantages of tax policy
4.1.2 Disadvantages of tax policy
4.1.3 Causes of limitations in the tax policy for Vietnamese real estate development
4.2 Impact of tax policy on Vietnamese real estate market
4.2.1 Sample description
4.2.2 Descriptive statistics
4.2.3 Research model construction
4.2.4 Testing research model
15
Chapter 5. Conclusion
The Vietnamese real estate market is still a young market, and in the process of formation
and development, the mechanisms and the policies of this market are gradually completed
and thus, the limitations as well as the disadvantages will be inevitable. Besides, the
development level of the Vietnamese real estate market is still low; the supporting factors for
this market are restricted; the land management is inadequate; the transparency of the market
is not high; and therefore, the ability to attract the investment capital is limited. These above-
mentioned reasons lead to the unhealthy development, the imbalance between supply and
demand for real estate transactions, the potential risks, low efficiency and effectiveness of
land use among the real estate market in Vietnam. It can be said that one of the reasons for
the stagnant and unhealthy development level of the real estate market is due to the
fragmentary tax policy with the disorganized changes, the loss of trust in the investors, the
unfairness, and the irrationality.
In addition, in the context of the international and regional economic integration, the
budget revenues currently decline since Vietnam has to meet the integration commitments,
and therefore, it has been suggested that budget revenues from real estate tax policy should
be paid more attention to in the future. Accordingly, it is essential to modify the inadequate
regulations of the tax law to real estate in order to help these tax rates show their important
roles in Vietnam’s tax law system. Hopefully, efficient and effective tax policy that plays the
role as a “special goods” involved in the Vietnamese real estate market – the potential market
will contribute much to the construction and development process of the country.
However, real estate has a complicated relationship with the policies of the Party and the
State; real estate is governed by many ministries and industries; and real estate has great
impacts on the economy in many different aspects. Therefore, during the research, synthesis,
evaluation, innovation, and development process of tax policies for the development of the
Vietnamese real estate market, the shortcomings as well as the limitations are inevitable. The
author of the study hopes to receive the comments of the teachers, the experts, the
researchers, the leaders, as well as the readers.
17
Learning Statement
After finishing the one-year MSc course, the completion of six modules as well as this
thesis, I have accumulated deep and comprehensive knowledge about financial activities,
business strategies, and financial structures. Added to this, I study about empirical research
methods, econometrics, and analysis of domestic as well as international banking portfolio.
Moreover, there are several optional subjects, focusing mainly on international finance and
development finance. These subjects help to provide me with necessary skills in order to
observe and analyze any change of the financial global market.
In a broader range, this thesis enriches my own understanding and knowledge about
monetary policy. Do changes made on monetary policies affect other sectors of the economy?
How and why the government has to tighten financial policies? What are the main factors
affecting by these changes to Vietnamese real estate?
Attending the MSc course seems to be the best choice for my career development. I would
like to send my warm thanks to all professors, all lectures, as well as all classmates for their
support and assistance during my studying time.
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