Land price and the two-price mechanism in state management of land – some issues and limitations

1. Types of land prices and mechanisms for applying land prices in specific cases

The current land law stipulates three types of land prices: land price bracket, land price table and specific land price.

Land price bracket

The land price bracket is the land price set by the State from the minimum to the maximum for each type of land (agricultural land and non-agricultural land) and by region (economic regions, urban areas). The Government shall promulgate land price frames once every 5 years for each type of land and for each region. Article 113 of the Land Law 2013  stipulates that: “During the implementation of land price frames, if the popular price in the market increases 20% or more over the maximum price or reduces 20% or more below the minimum price prescribed in land price frames, the Government shall adjust land price frames accordingly”. Understandably, the land price bracket is the “hard” land price promulgated by the State as a framework and basis for other land prices.

Land price table

According to the provisions of Clause 1, Article 114 of the Land Law 2013: “Based on the principles, methods of land valuation and land price frames, provincial-level People’s Committees shall develop and submit the land price tables to the People’s Councils of the same level for review before promulgation. Land price tables shall be developed once every 5 years and publicized on January 1 of the beginning year of the period”. Thus, on the basis of the land price bracket promulgated by the Government, the Provincial People’s Committee will build a land price table for their locality, the land price table is a collection of land prices according to each location of that locality. For localities that already have cadastral maps and have conditions on human resources and funding, the land price table shall be built up to each land plot.

The land price table stipulates the prices of different types of land according to the principle of being consistent with the land price bracket and types of land. It can be seen that these regulations help to concretize the land price bracket more suitable to the actual conditions of each locality and each type of land. In addition, the regulation of the land price bracket and the land price table, which is issued every five years, is a necessary regulation and is in line with international practices, creating a stable period, instead of allowing correction period is too short, leading to market instability.

Specific land price

Specific land price is the land price according to the land use purpose and land use term stated in the decision on land allocation, land lease, recognition of land use rights and land recovery decision. Specific land prices are individual, one-time, only applicable for each specific case.

According to the provisions of Clause 3, Article 114 of the Land Law 2013: “Provincial-level People’s Committees shall decide on specific land prices. The provincial- level land administration agency shall assist the provincial-level People’s Committee in the determination of specific land prices. During the implementation, the provincial-level land administration agency may hire organizations having consultancy functions for advising on the determination of specific land prices”.

In addition to the principles and methods of land valuation, the specific land valuation must also be based on information about the land plot and the market price of land. During the implementation of a specific land valuation, the provincial land management agency may hire an organization with the function of consulting on land price determination to advise on determining the specific land price, and then submit it to the Valuation Council. land for consideration before submitting it to the People’s Committee of the same level for decision.

Specific land prices are a progressive, positive point in land legislation. The land price bracket and land price table issued every 5 years can ensure price stability, but there are certain delays. The specific land price is determined by the Provincial People’s Committee in each case, capable of following the market price. In theory, the specific land price is usually higher than the price specified in the land price list and will better secure the interests of the owners.

2. Two-price mechanism in state management of land and some limitations

The two-price mechanism in the state management of land is understood to mean that for one type of financial obligation, two types of land prices can be applied for two different cases. It can be seen that, according to point a, clause 2, article 114 of the 2013 Land Law, a case of applying the land price table is: “Calculation of land use levy when the State recognizes land use rights of households and individuals for land areas within land use quotas, or permits change of land use purpose from agricultural land or non-agricultural land which is non-residential land to residential land for land areas within land allocation quotas applied to households and individuals” and a specific land price application case at point a, clause 4, article 114: “Calculation of land use levy when the State recognizes land use rights of households and individuals for land areas in excess of land use quotas, or permits change of land use purpose from agricultural land or non-agricultural land which is non-residential land to residential land for land areas in excess of land allocation quotas applied to households and individuals”. It can be seen that, for land use levy, land users who are recognized for land use rights, transfer land use purposes for the land area within the limit will pay land use levy according to the prices in the land price table, exceeding the limit for applying a specific land price and this is a typical case for the two-price mechanism in land management today.

The land legislation takes the boundary of the land level to set the case for the application of a specific land price or land price table. This regulation comes from the fact that the law does not encourage excessive land use. In fact, the specific land price will be higher than the land price in the land price list, so when using land in excess of the limit, the land users will have to pay a higher price as a form of “penalty” by the State. However, because of that, the application of the two-price mechanism can lead to inadequacies when applying specific land prices as a financial burden on land users.

Besides, the application of the two-price mechanism in some cases may cause losses to the state budget. According to the provisions of the land law, before October 15, 1993, the land use levy payable for the excess land area equal to 50% of the specific land price, within the limit, will not have to be paid. In the period 1993-2004, the area within the quota will have to pay a land use fee equal to 50% of the land price in the land price list, in excess of the limit will have to pay 100% of the specific price. Thus, in fact, it may happen that the subject with financial obligations will collude and agree with the staff holding the cadastral records to change the time of land use in order to reduce the cost of land using, land, leading to loss of state budget.