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Raising gold tax: advantages cannot make up for disadvantages
Other countries are imposing 0% on gold imports, while Vietnam taxes 0.5%, which experts think a reasonable tax rate.
The Vietnam Association of Financial Investors (VAFI) has suggested raising the import tax on gold by 10-20% in order to control the gold market after massive gold imports were said to be the main reason behind the dollar shortage.
However, the proposal has immediately faced strong opposition from experts and gold traders.
Dinh Nho Bang, Deputy Chairman of the Vietnam Gold Trading Association, said that Vietnam now can process just several tonnes of gold every year, while the gold available on the market is mainly sourced from imports. Currently, Vietnam imports 50-70 tonnes of gold every year, worth $6-7bil. Therefore, the big imports of gold have been considered the ‘culprit’ of the trade deficit.
Bang does not think that it is necessary to keep the import tax at lower levels in order to encourage imports through official channels. More importantly, he said, only reasonable tax rates can make sale prices reasonable, and accepted by the market. For example, the current gold price is VND17mil/tael, and if the tax rate is raised to 20%, the sale price would be VND20.5mil/tael, much higher than the world’s price levels.
In the past, Vietnam once taxed 3-5% on gold imports, which resulted in an increase of illegal imports of gold and illegal dollar bleeding through border gates, causing ups and downs in the market.
Bang said that other countries have the gold tax of 0%, while Vietnam taxes 0.5%, which explains why the domestic price is always higher than the world’s price.
The 0.5% tax rate is considered more reasonable than the 0% rate as it can help control foreign currency demand.
The proposal by VAFI to close gold trading floors also has not been applauded.
Luu Quang Dien, Director of SJC Hanoi, said that gold trading companies are safe and convenient for investors. Meanwhile, they help state management agencies more easily control the transaction volume, which serves as the basis for them to make suitable monetary policies.
VNN
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