Heated words collide with new gold tax hike

Authorities keep on a tough stance on a rapidly changing gold market

According to Document 15166/BTC-CST dated November 9, 2010 sent to the State Bank and other related ministries and agencies, the Ministry of Finance (MoF) proposed to raise the export tax from zero to 20 per cent, including semi-manufactured forms of gold and gold plated with platinum.

The document said the MoF move was designed  to restrict gold exports and regulate the domestic gold market which saw a record high gold price of up to VND38.5 million ($1,925) per tael on November 9.

Nguyen Xuan Tuong, general director of Phuoc Son Gold Company, said the new tax hike would hardly come up with the MoF’s expectation.

“During 2010, world market prices of gold have almost been lower than domestic prices. Therefore, there will not be any wise business who will risk trading gold at the local market with very high price to export raw gold to the world market to get the lower prices,” Tuong said.

Tuong said exports of processed  and jewelry gold broke the balance of domestic gold supply and demand, which sharply pushed up gold prices in the domestic market, however exports of processed gold was not included in the MoF’s proposed 20 per cent tax hike.   

“Currently, in Vietnam, there are only two joint ventures, Bong Mieu Gold Mining Company and Phuoc Son Gold Company which directly explore, exploit, process and export raw gold. Therefore, the MoF’s tax application proposal, is just imposed on these two enterprises,” said Tuong.

“Moreover, at present, the total  gold exports of both companies only reach about 1.5 tonnes each year, much lower than tens of tonnes of processed gold exported,” Tuong added.

 “The high export tax is likely to create illegal exporting activities, which will be difficult for local authorities to control and reduce the state budget collection,” said Vietnam Gold Traders Association secretariat chief Hoang Van Hach.

In addition, Tuong said, currently in many other countries, tax adjustments for mineral activities was often proclaimed in a specific road map of about two to five years for enterprises to have enough time to arrange their business effectively

“A sad story will definitely happen if the gold export tax rate goes up to 20 per cent without careful consideration. Both Bong Mieu and Phuoc Son will face closure with many workers unemployed and the state budget will lose at least VND100 billion ($5 million) each year,” Tuong said.

“This will also affect attracting more capital from our foreign partner, Olympus Pacific Minerals Inc. which has invested more than $80 million in our two gold mines and contributed to create thousands of jobs and the state budget collection for many years,” he added.

Meanwhile,  head of the MoF’s Tax Policy Department Vu Van Truong told VIR that the MoF was discussing with relevant agencies to introduce the most reasonable tax rate.

“The actual export tax rate can be changed and depends on processing levels of gold,” Truong added.