|
VAFI suggests tax exemption to stimulate demand
The Vietnam Association of Financial Investors (VAFI) has proposed exempting corporate income tax on income from bond interest, which it believes would help serve the demand stimulus packages.
In order to mobilise capital to fund demand stimulus packages, public investment, the government always issues bonds. However, a lot of bond issuances recently were unsuccessful due to the big gap between the interest rate the bond issuer set and the interest rate buyers wanted.
In fact, the Ministry of Finance has to thoroughly consider the ceiling interest rates for government bonds as the bond interest rate is always referred to as the benchmark for the market. High bond interest rates will badly affect the interest rate base in the market.
According to VAFI, the modest bond interest rate cuts of 1.5-2 percent would be enough to help lower bank interest rates. However, lowered bond interest rates will not encourage institutions to purchase bonds.
In order to settle the problem, VAFI thinks that it would be better to exempt enterprises from corporate income tax on bond interest.
“If the government imposes corporate income tax on enterprises’ bond investments, enterprises will demand interest rates high enough for them to cover tax. This means that if enterprises are free from tax, they will demand lower interest rates,” said Nguyen Hoang Hai, VAFI Secretary General.
Hai stressed that the state does not benefit from collecting the tax, because tax payers do not pay tax with their own money, but with the money they deduct from the bond interest they get.
That explains why the interest rates of education bonds, which are exempted from tax, are always 1.5-2 percent lower in comparison with government bonds of the same terms.
Not a single bond was sold at the bidding of 10-year term government bonds held on May 29, 2009.
Six institutions registered to purchase 444 billion dong worth of bonds, but none of the deals went through. It was because the seller set the low interest rate of 8.5 percent only, while buyers demanded interest rates of 9.25-13.5 percent.
Prior to that, the bidding of 500 billion dong worth of bonds issued by the Vietnam Express Development Corporation on May 27 with the guarantee from the government also failed. The ceiling interest rate set for the bonds was 8.8 percent, while the demanded rates were 9.7-10.5 percent.
The State Treasury has five times organised bond bids so far this year, but most of the bids failed, and only 100 billion dong worth of bonds were sold.
VietNamNet, LD
|
