Tax cuts floated to keep poor stock firms buoyant

Many stock firms have been badly burnt by the market’s regular falls

The State Securities Commission (SSC) and Ministry of Finance’s (MoF) Institute of Financial Strategy and Policy (IFSP) last week introduced a draft package to roll back securities taxes.

Previously, the National Assembly agreed to partly exempt securities investors from personal income tax (PIT). The plan would see brokerages escape value added tax (VAT) and shave 5 per cent off PIT for dividend payments and bonus shares to investors.

The package includes also cutting withholding tax on interest on offshore loans from 10 to 5 per cent to allure foreigners cashing in local equity market.

The tax cut plan comes amid rallying calls for reforming securities business tax policies. Local tax rules, which were not specifically designed for a rapidly growing securities market, are showing several problems with double taxation and unfair tax terms annoying foreign investors. The call to reform tax regulations comes as the securities market licks its wounds from months of heavy losses.

“The tax policy applied to the securities market has several irrational points which do not support market development. It is squeezing investors as they have to pay tax while still suffering losses,” said Nguyen Thanh Ky, general secretary of the Vietnam Association of Securities Business.

As such tax problems can only be reviewed by the National Assembly, which meets twice a year, market regulators proposed a specific tax changes be adjusted by the MoF to quickly settle the market.

“General tax rules only cannot  fully cover all entities participating securities market,” said Nguyen Son, head of SSC’s Market Development Department. “A specific legal regulation system is needed to adjust and supplement regulations in time to meet new securities market demands.”

Other long-term measures like tax incentives to securities derivatives transactions and to mutual funds, imposing lower taxes on transactions of listing securities compared with unlisted ones were also proposed.

Nguyen Van Phung, deputy director of the MoF’s Tax Policy Department, said the proposal was to be submitted to the National Assembly in 2012. A few problems relating to VAT and corporate income tax might be solved sooner via relevant decrees drafted by the MoF.