Several economic experts have strongly criticised a proposal made by Chairman of HCM City Real Estate Association (HoRea), Le Hoang Chau, to impose a tax on personal savings accounts of over VND500 million (USD24,038).
Chairman of HCM City Real Estate Association (HoRea), Le Hoang Chau
The proposal was sent to the State Bank of Vietnam, the Ministry of Finance, the Ministry of Construction and the General Department of Taxation.
According to the chairman of HoRea, to date no taxes have been levied on deposit accounts in Vietnam, however, depositors and those who buy securities generally earn high incomes, making it necessary to tax them in order to increase the state budget and encourage investment.
He said that, "Currently, if VND100 billion (USD4.76 million) is invested in business and production activities, it might generate a profit of around VND10 billion annually, and also helps to create hundreds of jobs. If this money stays in a deposit account, it may earn the depositor VND15 billion (USD714,285) per year, and this money is not taxed."
“By not taxing the interest on bank deposits we are encouraging people to save instead of investing it in more productive areas. Getting people to invest their personal savings will benefit several sectors of the economy, including real estate," he said.
“The government has already tightened the forex and gold markets. And whether the assets that would have gone into these markets have been put into realty, manufacturing or other productive investments, it is of benefit to the economy as a whole," he added.
Opposition
The proposal, however, received immediate negative feedback from local economic experts.
Dr. Nguyen Duc Thanh, Director of the Hanoi-based Vietnam Centre for Economic and Policy Research (VEPR), said that this was a self-serving recommendation, aimed at attracting a flow of money into the property sector from the banking system. If the proposal is approved, the tax would reduce deposits, putting personal savings at risk, he emphasised.
Another economist from VEPR, Dr. Pham Sy Thanh, said some countries in the world imposed taxes on interest from deposit accounts, but that only enterprises and not individuals were subject to them; the purpose of this being to encourage businesses to use it for their own production and operational needs. China applied the tax, but then repealed it in 2008.
Dr. Le Dang Doanh said deposits are an important channel for the mobilisation of capital in Vietnam along with the stock market and imposing taxes on deposits could undermine the balance between savings and investment. In addition, he said, individuals could easily get around the regulation by simply keeping several deposit accounts that fall under the tax threshold.
"I think that the proposal has reasonable foundation and should be carefully considered before thinking of approving it,” Mr. Doanh emphasised.
