Gold tax rate glitters in eyes of some firms

According to the Ministry of Finance’s (MoF) Circular 184/2010/TT-BTC, from January 1, 2011 the export tax will rise from zero to 10 per cent on gold bars of under 99.9 per cent purity, powdered gold, gold materials and jewelry with high gold content.

An MoF Tax Policy Department representative said the tax was similar to export tariffs on other raw minerals. “The move aims to prevent many individuals and enterprises from massively exporting gold jewelry, which will badly impact on the local gold supplies,” said the MoF’s representative.

Nguyen Ngoc Que Chi, director of Sacombank Jewelry Limited Company, said thanks to the MoF’s circular, domestic gold supplies would be secured. “This will help to stabilise the market and the lack of gold will be addressed.”

A chief analyst of an investment fund in Hanoi also supported the MoF’s circular. He said because the gold market had a close connection to foreign currency market, the government could stabilise the financial and stock markets in the next few months.

Dr. Le Dang Doanh, former director of Vietnam’s Central Institute for Economic Management (CIEM), said: “There are few enterprises that want to pay tax. The high or low tax application in the field of mining must be based on different conditions in different countries. Therefore, Vietnam’s high tax rate does not mean that our competitiveness is less than others.”

Doanh said imposing an export tax on gold would benefit the environment, guarantee the effective exploration of minerals and state budget collection.

The new tax has faced strong opposition from gold processing and mining enterprises. Olympus Pacific Minerals Inc, the Canadian firm investing in the Bong Mieu and Phuoc Son gold mining projects in central Quang Nam province, stated it decided to defer making a $100 million new investment in Vietnam.

“The changes in policy which raised taxes to the highest in the world, after we have made our investment decision, make new investment decisions almost impossible. Investors need certainty of financial terms before making investments,” Olympus Pacific Minerals chairman David Seton told VIR.

Seton said developing Vietnam’s mining industry to enable it to be self sufficient in industrial minerals and gold would require billions of dollars in risk capital to be invested over decades.

“If foreign funding is required for this then investment conditions will need to improve to attract this capital. A 15 per cent gross royalty and taxes on exports will not attract new capital into the industry.

“We are planning to invest in new projects in Malaysia which can now compete better with Vietnam for new funding because of their supportive fiscal regime,” Seton said.

Doanh said Vietnam should set up a specific roadmap on the tax application in the mining field for enterprises to have enough time to arrange their businesses effectively.