Proposal to impose 10% tax on gold trading

Considering that the current tax policy for the gold trading industry is the most favorable, VAFI recommends that gold jewelry and gold bar trading be subject to value added tax according to the deduction method at a rate of 10%.

The Vietnam Association of Financial Investors (VAFI) has just sent a dispatch to the Prime Minister, the Ministry of Finance , the State Bank of Vietnam (SBV),... proposing to apply value added tax (VAT) according to the deduction method for physical gold trading activities.

Low taxes, money flows into gold speculation

Regarding the current tax policy for gold trading, according to VAFI, gold bars are exempt from VAT, while VAT on gold jewelry trading is determined based on the selling price minus the purchase price multiplied by the tax rate of 10% (according to the listed price list).

“Suppose a business buys and sells 1 tael of gold jewelry for 97 to 100 million VND, the difference between the buying and selling price is 3 million VND, then it only has to pay about 300,000 VND in tax.

If VAT is calculated using the deduction method, the invoice will be issued for VND110 million and the tax payable will be VND10 million. Thus, the VAT collected will differ 30 times between the deduction method and the direct method of VAT,” the association analyzed.

It is recommended that gold jewelry and gold bar trading be subject to value added tax under the deduction method at a rate of 10%.

Recently, the Ministry of Finance proposed to add a tax of 0.1% on the transfer value when selling gold bars, for example, selling 1 SJC gold bar for 100 million VND, the seller must pay 100,000 VND in tax. VAFI believes that this very low tax rate will have no effect in limiting the huge flow of money into the gold market.

On the contrary, the above tax policy has strongly encouraged speculative money flow into the gold market, comfortable speculation with little loss, even creating a situation of creating artificial supply and demand at many times to create effects for many participants and create huge demand for the gold market.

According to VAFI estimates, our country’s gold reserves are over 2,000 tons, equivalent to about 250 billion USD at current prices. Most of these 2,000 tons were purchased and “put under the bed”, not returned to the commercial banking system.

On a macro level, gold accumulation is more dangerous than hard currency because when people buy hard currency, most of this foreign currency goes back to the banking system.

“In recent years, if there had been a VAT policy on gold as a consumer good, the banking system would have had about 100 billion USD instead of losing and using this foreign currency to pay for imports and exports. The domestic currency would also have been much stronger because of this amount of foreign currency and the State Bank could have easily stabilized the exchange rate and sharply reduced the mobilization interest rate.

The tax exemption policy for gold trading (mainly gold bar trading) has strongly increased the goldification of the economy . The current tax policy for the gold trading industry is enjoying the most incentives, more than many industries that need tax incentives and need to be encouraged to invest,” the VAFI document stated.

Need to impose 10% tax on gold sales invoices

VAFI recommends that the current tax policy needs to be changed. Accordingly, the association recommends that the trading of gold jewelry and gold bars must be subject to VAT under the deduction method like normal goods, with equal tax liability at a tax rate of 10%.

“If we compare gold trading to real estate, when selling real estate under the VAT deduction method, individuals buying a house must pay 10% VAT, and when selling a house, they must also pay personal income tax at 2% of the house selling price. In short, the sale of gold bars, gold jewelry... (generally called physical gold) from business establishments must be taxed 10% on the sales invoice,” said VAFI.

The Association believes that with this policy amendment, short-term speculation will be almost completely eliminated; speculation and price inflation will be completely stopped. At the same time, the demand for speculation and investment in the gold market will decrease sharply and cash flow will be diverted to the banking system; the domestic currency will be strongly protected, and foreign currency reserves will increase in the banking system.

The demand for gold will decrease sharply when there are other stabilizing policies. According to the association, the State Bank should maintain a policy of stabilizing exchange rates in the short, medium and long term to attract foreign direct and indirect investment flows.

At the present stage, the State Bank should have a policy to increase savings interest rates at a reasonable level. After having a new gold tax policy and a reasonable property tax, the State Bank can completely maintain a low interest rate policy, much lower than the current level, while still ensuring exchange rate stability.

Vietnamnet.vn

Source: https://vietnamnet.vn/vang-mua-xong-de-duoi-gam-giuong-dau-co-cho-gia-tang-kien-nghi-ap-thue-10-voi-kinh-doanh-vang-2458469.html