10-20% gold import tax increase proposed

Thursday, May 8, 2008
The Viet Nam 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 pointed out as the main reason behind the dollar shortage.

VAFI thinks that raising gold import tax at this moment will help curb inflation and ease the dollar shortage, while it will help improve the state budget collection.

The latest report by the Viet Nam Gold Business Association showed that up to 43 tonnes of gold were imported to Vietnam in the first four months of the year, worth $1.2bil, which is equal to ½ of the total imports in 2007.

Analysts said that if the current speed of gold import is maintained, Viet Nam will have to spend nearly $4bil for gold imports, an overly high figure.

VAFI has anticipated that some experts may fear that the gold tax increase may pave the way for smuggling. However, VAFI thinks that in the current conditions, Vietnam needs to accept this as the price to be paid for reducing the trade deficit. Meanwhile, the gold smuggling can be minimized if the Government takes necessary measures. For example, the Government can request gold trading companies not to buy gold from the supplies with no clear origin, and set heavy punishments for violators.

VAFI has also asked state management agencies not to allow commercial banks and gold trading companies to establish gold trading floors.

According to VAFI, most investors on trading floors now purchase gold not for hoarding as assets, but for speculation, as they hope to sell later to get profit when the prices go up. As such, big sums of idle money are being poured into gold trading floors, while a lot of gold is needed to serve the increasingly high demand.

The gold transactions by nature, are a type of gambling, while gold trading floors become legal casinos. Big sums of money have been put into the casinos, while they should be put into production.

“It is the right time for the State Bank of Viet Nam to put an end to the existence of gold trading floors,” VAFI concluded. (Tien phong)