MANAGEMENT OF LAND RENT COLLECTION FROM ENTERPRISES AT THE TAX DEPARTMENT OF HANOI CITY

MANAGEMENT OF LAND RENT COLLECTION FROM ENTERPRISES AT THE TAX DEPARTMENT OF HANOI CITY

MANAGEMENT OF LAND RENT COLLECTION FROM ENTERPRISES AT THE TAX DEPARTMENT OF HANOI CITY

Dr. Bui Thi Hong Viet

Dr. Nguyen Thi Le Thuy

National Economics University

M.Sc. Nguyen Bao Dung

General Department of Taxation

Abstract: This article focuses on analyzing the current state of land rent management for enterprises at the Hanoi Tax Department, from planning, organizing the implementation to controlling collection.

Based on the analysis of the current situation, the article points out the limitations and proposes some solutions to improve the management of land rent for enterprises at the Hanoi Tax Department in the upcoming period.

Keywords: land rent, tax management, tax department.

I. Introduction

Land plays an extremely important role in the economic, political, and social life of each country. In our country, land is identified as an invaluable national resource, a special means of production, the most important internal resource for economic development, the distribution area of residential areas, the construction of economic, political, cultural, and defense facilities, a fundamental part of the national territory, an important component of the living environment, and the result of the revolution of the entire nation. Therefore, state management of land in general and the management of land rent collection, in particular, is always a matter of special concern to our State.

In recent years, land has contributed more than 10% of the state budget revenue and nearly 20% of the domestic budget revenue annually. Financial revenue from land is a tool to mobilize direct revenue to the state budget. Land revenue policies contribute to encouraging the efficient and economical use of land.

From 2020 to 2022, the annual amount collected from renting land to enterprises in Hanoi ranged from over 5,685 billion VND to over 10,220 billion VND. However, the ratio of enterprises owing land rent to the total number of enterprises renting land and the ratio of land rent owed by enterprises to the amount they are supposed to pay is still high. There are many reasons for this situation, including limitations in the management of land rent collection for enterprises at the Hanoi Tax Department.

II. Theoretical Basis for Managing Enterprise Land Rent at the Tax Department

1. Enterprise Land Rent

According to the National Assembly (2013), the state leases land, “granting land use rights to those in need through a land use right lease contract.” As Pham Lan Huong (2020) notes, land is under the ownership of the entire people, represented and uniformly managed by the State. The rights to land include ownership, disposal, and use rights; however, the State only grants land use rights to enterprises through land leasing. Therefore, the essence of land leasing is granting land use rights. Enterprises leasing land do not have disposal rights over the leased land but only the right to use, exploit the utilities, functions, and benefits from the leased land.

Enterprises have the obligation and responsibility to pay the land rent fully, accurately, and timely in either of two forms: a one-time payment for the entire lease period or annual payments throughout the lease period. For domestic enterprises, the state allows choosing between a one-time payment or annual payments. For foreign enterprises, land rent is paid once for the entire lease period. Additionally, enterprises using land for aquaculture purposes only pay land rent annually.

Enterprises leasing land must fulfill their land rent payment responsibilities to the tax department. In other words, the tax department is responsible for collecting land rent from enterprises leasing state land. The basis for calculating land rent includes: (1) land area; (2) lease term, based on the duration specified in the land lease contract; (3) land rent unit price; (4) form of land lease.

2. Management of Enterprise Land Rent Collection at the Tax Department

According to Nguyen Thi Ngoc Huyen, Doan Thi Thu Ha, and Do Thi Hai Ha (2012), management is “the process of organizing, leading, and controlling resources and activities of the system to achieve the system’s objectives effectively and sustainably under constantly changing environmental conditions.” 

Pham Lan Huong (2020) suggests that “in a narrow sense, operationally from the perspective of agencies implementing financial land revenue (the tax department and other agencies authorized by the state to perform financial land revenue tasks), state management of land finance involves organizing and implementing the state’s land law, specifically, organizing, managing, and supervising by the financial revenue management agency to ensure land users fulfill their financial obligations regarding land to the state budget as prescribed by law.” 

From these concepts, the management of enterprise land rent collection at the tax department can be defined as the process of planning, organizing, implementing, and controlling the collection of land rent from enterprises to ensure that enterprises leasing land from the state pay the land rent correctly, fully, and timely into the state budget as required by law.

The goal of managing enterprise land rent collection at the tax department is to ensure the accurate, full, and timely collection of land rent from enterprises into the state budget. These goals are specified through the following indicators: (1) the ratio of actual land rent collected to the land rent enterprises must pay; (2) the ratio of actual land rent collected to the estimated revenue (collection plan); (3) the ratio of enterprises owing land rent; (4) the ratio of land rent owed by enterprises.

Managing the collection of land rent from enterprises at the tax department includes the following aspects: planning the collection of enterprise land rent, organizing the implementation of the collection plan, and controlling the collection of enterprise land rent.

III. Overview of Enterprises Incurring Land Rent at the Hanoi Tax Department

In 2020, there were 9,952 enterprises renting land, this number increased to 9,974 enterprises in 2021, and decreased to 9,712 enterprises in 2022. By purpose of use, it can be seen that the number of enterprises renting land for industrial production accounts for the largest proportion, along with the largest area of rented land. Most enterprises renting land choose the annual payment method.

Table 1: Enterprises Incurring Land Rent at Hanoi

Source: Hanoi City Tax Department

IV. Current State of Managing Enterprise Land Rent Collection at the Hanoi Tax Department (2020-2022)

1. Current State of Planning Enterprise Land Rent Collection

Annually, the Hanoi Tax Department plans for enterprise land rent collection for the following year through the following process.

First, the Hanoi Tax Department analyzes the objectives and revenue targets assigned by the General Department of Taxation each year, as well as the environmental factors affecting the collection of enterprise land rent.

Specifically, the Hanoi Tax Department analyzes new legal regulations and policies related to enterprise land rent collection. During the period 2020 – 2022, due to the impact of the Covid-19 pandemic, the State introduced several policies to support enterprises, such as exemptions, reductions, and extensions of land rent payment deadlines.

Additionally, the Hanoi Tax Department analyzes the socio-economic development situation to forecast enterprise land rent demand, thereby estimating the land rent revenue.

Furthermore, the Hanoi Tax Department bases its estimates on the land rent collection situation from previous years to predict the land rent revenue for the planning year.

Based on the analysis of these factors, the Hanoi Tax Department determined the following enterprise land rent collection targets for the period 2020 – 2022:

Table 2: Enterprise Land Rent Collection Targets

Source: Hanoi City Tax Department

After determining the enterprise land rent collection targets, the Hanoi Tax Department also identified solutions to achieve these targets. During the period 2020 – 2022, the following solutions were proposed:

– Prioritize accurate, full, and timely collection of newly arising amounts each year.

– Prioritize collecting from enterprises that pay land rent in one lump sum for the entire lease period, as this group has large revenue sources with fewer enterprises, making resource allocation easier.

– Prioritize collecting from enterprises with large revenues.

– The debt collection enforcement division will recover arrears from previous years for enterprises continuing to lease land this year to avoid overlapping debts, making it difficult to recover these amounts in the future.

– Classify enterprises with large debts and bad debts to allocate resources for urging and enforcing debt recovery quickly, accurately, fully, and timely according to the set plan.

2. Current State of Organizing the Implementation of Enterprise Land Rent Collection Plan

2.1. Current State of Managing Land Rent Declarations and Payments

Enterprises submit declaration dossiers at the receiving agencies as prescribed in Article 60 of Decree No. 43/2014/ND-CP dated May 15, 2014, of the Government. After the receiving agency checks the completeness and consistency of the dossier, it will transfer the enterprise’s land lease dossier to the Land Registration Office.

Here, the Land Registration Office will prepare an information transfer slip and forward it to the tax agency for dossiers without deductible items; simultaneously forward to the tax agency and the finance agency for dossiers with deductible items to determine the land rent; and identify deductible items from the land rent as prescribed.

The Hanoi Tax Department reviews the dossiers transferred by the Land Registration Office, receives information about deductible items transferred by the finance agency (if any), determines, and issues a Notice of Land Rent Payment. In cases where the dossier is found to be incorrect or lacking grounds to determine the land rent, the tax agency will request the Land Registration Office to identify and supplement the information.

Table 3: Status of Dossier Processing at the Hanoi Tax Department

Unit: Dossiers

Source: Hanoi City Tax Department

In 2020, the Hanoi Tax Department had to process 1,848 dossiers, of which 20 were returned due to errors. These figures for 2021 and 2022 were 2,199, 25, and 1,426, 31, respectively.

The errors in the dossiers were mainly due to unclear information from the enterprises renting land or discrepancies in the rented land area compared to the information stored at the Ministry of Natural Resources and Environment.

In all cases where errors occurred, the Hanoi Tax Department returned the dossiers, requesting confirmation of the information. Overall, the Hanoi Tax Department performed well, consistently processing dossiers on time and promptly notifying enterprises of any errors.

2.2. Delegation and Guidance to Subordinate Tax Departments of Hanoi Tax Department for Land Rent Collection

According to regulations, for land rent amounts, the Hanoi Tax Department will direct its subordinate tax departments to issue notifications twice a year, once on April 30th and once on September 30th, with the goal of concentrated collection in May and October.

The land rent collection notifications are based on the number of registered dossiers, the number of declared dossiers, and ensure 100% notification to all registered dossiers. The calculation of land rent for each dossier is based on current policies and legal regulations.

However, despite having specific unit price formulas, the tax agency still encounters many exceptional and difficult-to-calculate cases. For example, according to Article 4 of Decree No. 46/2014/ND-CP of the Government, the method of determining the price by specific method or adjustment coefficient must be based on whether the value of the plot is more than 10 billion, 20 billion, or 30 billion.

In reality, projects are allocated in several phases, so local authorities are confused about whether to determine the land plot value for the entire project or for each land lease decision by phase. Additionally, for cases auctioned according to the 2003 Land Law, now adjusting the land rent unit price according to Decree No. 46/2014/ND-CP of the Government, the stable period of the unit price and adjustment levels are not specifically regulated.

According to Clause 5, Article 3 of Decree No. 123/2017/ND-CP of the Government and Article 1 of Circular No. 11/2018/TT-BTC, when the land use is extended, the land rent is determined according to the policies and land prices at the time of the extension. For annual land rent payment cases, the stable unit price cycle is calculated from the time the competent state authority issues the land lease extension decision.

Therefore, for annual land rent payment cases, whether the stable unit price cycle is considered the first stable unit price cycle or adjusted for the next stable unit price cycle needs clarification.

Thus, the Hanoi Tax Department has regularly and actively coordinated with relevant agencies to propose a suitable, transparent formula for calculating land rent.

Table 4: Enterprise Land Rent Collection Results

Source: Hanoi City Tax Department

In 2020, land rent was collected from 9,952 enterprises, amounting to over 7,883 billion VND. In 2021, land rent was collected from 9,974 enterprises, amounting to over 10,220 billion VND. This year saw a significant increase due to a project renting land for the U.S. embassy, which paid the entire lease amount upfront. In 2022, land rent was collected from 9,712 enterprises, amounting to over 5,685 billion VND.

2.3. Management of Land Rent Exemptions and Reductions

Due to the negative impacts of the Covid-19 pandemic, the State implemented policies to exempt and reduce land rent payments to support enterprises.

Table 5: Status of Land Rent Exemptions and Reductions Due to Covid-19

Source: Hanoi City Tax Department

In 2020, when the State issued a 15% support rate for enterprises and individuals renting land under Article 2 of Decision 22/2020/QD-TTg, 4,312 out of 4,546 submitted dossiers were approved, with a total exempted and reduced amount of 678.45 billion VND.

Subsequently, with a 30% support rate for those affected by Covid-19 under Article 2 of Decision 27/2021/QD-TTg, 4,780 out of 5,075 submitted dossiers were approved, with a total exempted and reduced amount of 1,062.47 billion VND. By 2022, 5,142 enterprises were approved, with an exempted and reduced amount of 848.21 billion VND.

This reflects the State’s significant attention to supporting enterprises, and the Hanoi Tax Department has effectively implemented the new state policies.

Immediately after receiving exemption and reduction dossiers from enterprises, the Hanoi Tax Department reviewed and made exemption and reduction decisions for eligible cases. Additionally, they notified the subordinate tax departments and enterprises of the exempted amount and the remaining payable amount.

However, during this process, the Hanoi Tax Department noticed overlapping policies, causing confusion among tax officials about which policies to use for calculating exemptions and reductions, as well as land rent for enterprises.

For example, according to Decree No. 46/2014/ND-CP and Decree No. 135/2016/ND-CP of the Government, in cases where the competent authority leases land without an auction to implement investment projects in industrial infrastructure clusters, land rent is exempted after the basic construction period’s land rent exemption as per investment laws.

However, Decree No. 68/2017/ND-CP, dated May 25, 2017, on the management and development of industrial clusters, does not provide for land rent exemption during the basic construction period.

The exemption period for land rent of industrial infrastructure projects under Decree No. 68/2017/ND-CP is also inconsistent with Decree No. 135/2016/ND-CP, causing local confusion when considering land rent exemption for the basic construction period for investment and infrastructure projects in industrial clusters and craft villages.

Additionally, according to Clause 7, Article 3 of Decree No. 123/2017/ND-CP, when a land lessee is granted an Investment Certificate, Investment Registration Certificate, or Investment Policy Decision by a competent authority with specific project implementation progress recorded, basic construction exemption or reduction follows the initially issued progress.

However, the timing of the competent state authority issuing the land lease decision is later than the initial project progress recorded in the four types of documents (initial), thus applying both the initial and adjusted Investment Certificates.

If based on the initial Investment Certificate, the basic construction period has expired, disadvantaging the land user due to a fault not caused by the land user. 

Additionally, according to Clause 7, Article 3 of Decree No. 123/2017/ND-CP, the Government only stipulates that if the State’s lessee does not request land rent exemption during the basic construction period, the exemption period according to investment laws starts from the land lease decision. It does not specify if the lessee requests but does not receive exemption (due to late submission, ineligibility, etc.), when the exemption period is calculated—from the time of land rent calculation or after the basic construction period approved by the competent authority.

Regarding the amount recorded in the decision, it is challenging for tax management officials to implement accurately. According to Clause 7, Article 3 of Decree No. 123/2017/ND-CP, dated November 14, 2017, the land rent exemption for one-time full-period land rent payment is determined based on the land price, adjustment coefficient, and percentage rate issued by the provincial People’s Committee.

However, for one-time full-period land rent payment, there is no percentage rate for land rent unit price, making this regulation not suitable for practical implementation.

2.4. Urging Subordinate Tax Departments of Hanoi Tax Department to Recover Land Rent Debts

Managing land rent debt is one of the essential tasks of the Hanoi Tax Department. Land rent debt can prolong if not properly pursued and handled.

In recent years, especially during the period 2020 – 2022, the severe impact of the Covid-19 pandemic led to an increase in enterprises’ land rent debt. The debt recovery task is directly assigned to the subordinate tax departments by the Hanoi Tax Department, which also plays the role of director, advisor, and problem solver during the implementation process.

From 2020 to 2022, under the direction of the Hanoi Tax Department, the subordinate tax departments recovered over 2,322 billion VND in land rent debts in Hanoi.

Table 6: Status of Land Rent Debts and Recovery

Source: Hanoi City Tax Department

The period 2020 – 2021 saw the peak of the Covid-19 pandemic, which limited many enterprises’ production capabilities, leading to their inability to pay land rent. Additionally, government policies allowed enterprises to postpone land rent payments, resulting in these becoming debts. By 2022, with the pandemic essentially controlled and economic recovery underway, the amount of debt recovered increased rapidly.

3. Current State of Controlling Enterprise Land Rent Collection

The Hanoi Tax Department has identified two main subjects for control: enterprises renting land and its subordinate tax departments.

For inspections at the offices of subordinate tax departments, inspection teams will select those with a large number of enterprises renting land and high annual land rent revenue for review.

Focusing on inspecting these tax departments helps monitor the implementation of the planned content from the beginning of the year while actively resolving common issues and difficulties faced by lower-level tax authorities.

In 2020, the Hanoi Tax Department conducted annual inspections at 7 tax departments and sudden inspections at 3 tax departments, detecting 1 violation case, which was promptly addressed. In 2021, the Department identified 2 violation cases; however, these violations did not significantly impact state budget revenue.

For enterprises, the Hanoi Tax Department conducts both regular and sudden inspections. Inspection content focuses on issues such as improper land use declarations to evade land rent exemptions, encroachments, and falsified declarations to reduce payable land rent amounts.

Each violation type is subject to administrative penalties according to current laws.

In 2020, the Hanoi Tax Department inspected 203 enterprises, detecting 120 violations and recovering fines amounting to 238.5 million VND.

In 2021, inspections covered 89 enterprises, detecting 57 violations and recovering fines totaling 78.4 million VND.

In 2022, inspections included 189 enterprises, identifying 114 violations and recovering fines amounting to 179.45 million VND.

V. Evaluation of Enterprise Land Rent Collection Management by the Hanoi Tax Department

Table 7: Evaluation of Enterprise Land Rent Collection Management Goals by the Hanoi Tax Department (2020 – 2022)

Source: Hanoi City Tax Department

1. Limitations in Planning Enterprise Land Rent Collection

The determination of targets sometimes does not align with reality; many enterprises still owe significant amounts, yet the revenue estimates are high, affecting the plan’s completion efficiency. The proposed solutions during the planning process are sometimes theoretical and challenging to implement effectively.

2. Limitations in Organizing the Implementation of Land Rent Collection Plan

Managing land rent declarations still has many issues as the Hanoi Tax Department does not directly manage enterprises’ land rent declarations. Information is prone to errors and must be cross-verified among related departments to process dossiers.

Regarding tax exemption and reduction management, the decision issuance process remains manual, leading to unnecessary administrative procedures. Additionally, the Hanoi Tax Department has not provided comprehensive guidance for the subordinate tax departments to fully apply enforcement measures to recover land rent debts. Measures mainly involve a mix of bank account deductions and invoice usage suspension, making it challenging to address difficult-to-collect and large debts.

3. Limitations in Controlling Land Rent Collection

The Hanoi Tax Department has not focused enough on controlling land rent collection. The number of inspections on enterprises renting land is still limited. Inspections at subordinate tax departments lack coverage, as only those with a large number of enterprises renting land and high land rent proportions are selected. This prevents the Hanoi Tax Department from thoroughly evaluating the performance of other subordinate tax departments in the area.

VI. Solutions to Improve Enterprise Land Rent Collection Management at the Hanoi Tax Department

The Hanoi Tax Department needs to analyze the basis for planning enterprise land rent collection more thoroughly to ensure the targets set are reasonable, avoiding overly high or low targets that negatively impact the implementation process. Specifically, the Hanoi Tax Department should analyze current legal regulations and policies carefully and assess the local socio-economic situation. Proposed solutions need to be innovative, potentially referencing solutions from other localities or countries to adopt a multidimensional approach, enabling breakthrough solutions.

Provide specific and clear guidance to subordinate tax departments to ensure the collection process is carried out according to the planned schedule. Additionally, the Hanoi Tax Department must actively support and address queries from subordinate tax departments during the collection of enterprise land rent arising in their areas.

The Planning and Legal Affairs Department of the Hanoi Tax Department should regularly review and systematize legal documents to identify newly issued regulations and expired regulations related to land rent exemption and reduction, avoiding confusion in applying the correct regulations, which may cause conflicts with enterprises.

Encourage subordinate tax departments to quickly recover outstanding land rent debts in their areas. For enterprises with large debts and high delinquency rates, the Hanoi Tax Department needs to directly study and direct subordinate tax departments to recover these amounts as soon as possible, avoiding prolonged debts leading to substantial amounts that are difficult to recover.

Proactively monitor actual revenue at subordinate tax departments weekly and monthly during the land rent collection period to ensure effective operations and timely resolve any difficulties encountered by the tax departments.

Increase inspections of subordinate tax departments, not just focusing on those with many enterprises renting land, to timely identify existing issues at various tax departments. Enhance inspection efforts for enterprises suspected of violations by the Hanoi Tax Department.

References

1. Government (2014), Decree No. 43/2014/ND-CP detailing the implementation of certain articles of the Land Law.
2. Government (2014), Decree No. 46/2014/ND-CP on land rent and water surface rent.
3. Government (2016), Decree No. 135/2016/ND-CP amending and supplementing certain articles of decrees on land use fees, land rent, and water surface rent.
4. Government (2017), Decree No. 68/2017/ND-CP on the management and development of industrial clusters.
5. Government (2017), Decree No. 123/2017/ND-CP amending and supplementing certain articles of decrees on land use fees, land rent, and water surface rent.
6. Government (2020), Decision No. 22/2020/QD-TTg on reducing land rent for 2020 for entities affected by COVID-19 as per Resolution No. 84/NQ-CP dated May 29, 2020.
7. Government (2021), Decision No. 27/2021/QD-TTg of the Prime Minister on reducing land rent for 2021 for entities affected by COVID-19.
8. Hanoi City Tax Department (2020), 2020 Land Rent Settlement Report.
9. Hanoi City Tax Department (2021), 2021 Land Rent Settlement Report.
10. Hanoi City Tax Department (2022), 2022 Land Rent Settlement Report.
11. Nguyen Thi Ngoc Huyen, Doan Thi Thu Ha, and Do Thi Hai Ha (2012), Textbook on Management, National Economics University Publishing House.
12. Pham Lan Huong (2020), Lecture on State Management of Land, National Economics University Publishing House.
13. National Assembly (2013), the Law on Land.

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“The article’s content refers to the regulations that were applicable at the time of its creation and is intended solely for reference purposes. To obtain accurate information, it is advisable to seek the guidance of a consulting lawyer.”

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