Tax Policy and Housing Prices: Evidence from Vietnam

This paper examines the effect of tax policy on housing prices in Vietnam for the period from October 2004 to September 2009. The OLS regression approach suggests that the land use tax revenues is positively related to housing prices, while the personal income tax revenues negatively related. The event study approach finds that all five key changes made to the personal income tax, corporate income tax and non-farm land use tax have caused the housing prices to decline on average 6-11% during the event window, but only the impact of the personal income tax changes is statistically significant. Our findings offer some implications for the government. This, together with the finding from the test of determinants of housing prices, suggests that the personal income tax policy could be one of the key influential factors that determine housing prices. And hence, in order to monitor the housing market, in term of tax policy, the government could use personal income tax as a monitoring tool.