25% tax on securities investments too high

The plan to impose a tax of 25% on income from securities investments has been facing strong opposition from experts, who say the taxation should be re-considered or it will badly affect the fledgling stock market.

25% is not reasonable

Nguyen Hoang Hai, Secretary General of the Vietnam Association of Financial Investors (VAFI), said that the suggested 25% tax rate proved to be overly high. The taxation body, according to Mr Hai, does not have the necessary legal basis to build up the method to calculate the expenses for the work that creates income from capital assignment deals.

Let’s take the expenses investors have to pay for brokerage as example. Investors can show the bills to prove the expenses, while they do not have regular vouchers if they make transactions on the OTC market. Investors also cannot claim other expenses, including ones for getting information, training, getting loans and travelling as they cannot get bills.

Moreover, taxation agencies will find it difficult to define the selling and purchasing prices in transactions on the OTC market as the trading deals are not carried out through securities companies, and investors do not have transaction accounts at the companies.

According to Mr Hai, other countries in the region, including Hong Kong, Singapore, and Thailand, do not tax securities assignment deals, while China imposes a very low tax rate. As for the official market, it would be better to tax transactions based on the selling prices (for example, 0.05-0.1% of the selling prices). As for the OTC market, as it is difficult to define the purchasing and selling prices, it would be better to base a tax on the face value of securities, and the tax rate should be higher, at 0.5%.

Economist Nguyen Van Tu also shared the same view, saying that the 25% tax rate proved to be unfeasible. In fact, taxation bodies seem to be targeting the investors who became rich rapidly when the market was hot and brought fat profit to investors.

Tran Dinh Thien, Deputy Director of the Vietnam Economics Institute, agreed that a lot of investors got fat profit, but taxation bodies should consider setting tax rates under the normal operation conditions of the market, not under any other special conditions. Moreover, Mr Thien said that tax policies should be built up in a way that helps stimulate the fledgling market.

Overlapping taxation?

Dr Nguyen Van Tuyen has asked for the reconsideration of the income tax on the income from dividends and the income from capital contribution profit. Before giving dividends or profit to shareholders or capital contributors, economic institutions have to pay corporate income tax already.

If the income from dividends or profit from capital contributions were still subject to the personal income tax, it would violate the principle of not taxing twice on the same income.

Lawyer Cao Ba Khoat also said that taxing dividends would create an overlap in taxation, or double taxation, since dividends are post-tax income.

Source: Lao động