Vietnam should explore tax on gold investments amid auction strategy: expert

April 23, 2024 | 14:47
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This week, the State Bank of Vietnam (SBV) orchestrated a gold bar auction to stabilise the gold market. Prof. Tran Tho Dat, an economic advisor to the prime minister, mentioned that in addition to the auctions, allowing gold imports and imposing taxes on gold investment activities were necessary measures.
Vietnam should explore tax on gold investments amid auction strategy: expert
Prof. Tran Tho Dat

Given the SBV's actions, do you anticipate a decrease in SJC gold prices post-auction?

The recent market dynamics suggest that even before the auction, SJC gold prices had already begun to stabilise after consistently setting new records. My long-term observation reveals a recurring theme: market prices tend to retreat following governmental or central bank interventions in the gold market. Statements from influential entities like the government or SBV often have an immediate impact.

Since the initiation of gold bar auctions by the SBV in 2013, how effective have these interventions been in regulating market prices?

Historically, interventions have been mostly rhetorical, with the actual market effects being temporary. After initial declines, gold prices have tended to resurge, sometimes even stronger than before. The regulator often ceases interventions when prices stabilise, aligning more closely with global trends, obviating the need for further interference.

Is the SBV's strategy any different from the past, this time?

Unlike previous instances characterised by mere announcements, the SBV is substantiating its intentions with concrete actions. They've mandated rigorous compliance with invoicing and documentation for gold transactions, aligning with directives from the Prime Minister, the Ministry of Finance, and the General Department of Taxation. These measures aim to enhance transparency and accountability in gold transactions, particularly for gold bars.

If the SBV were to delay the auction, could there be a potential rebound in gold prices?

The correlation between domestic gold prices and global market trends has historically been strong, barring policy-induced divergences. Since the implementation of Decree 24/2012/ND-CP on gold trade management, domestic prices have largely mirrored international fluctuations. Notably, any sudden spikes have primarily affected SJC gold, with other forms like gold jewellery continuing to track global prices closely.

Can the SBV auction effectively quench the thirst for gold among Vietnamese consumers?

A survey by the World Gold Council highlighted that 73 per cent of Vietnamese expressed a desire to purchase gold, surpassing the enthusiasm seen in traditional gold-consuming nations like India and China.

This deep-rooted affinity for gold, perceived not just as an adornment but also as a safeguard of value and a financial reserve, underscores the cultural significance of gold in Vietnam. However, the SBV's auctions, supplying a mere fraction of market demand, are unlikely to significantly influence overall pricing dynamics or fully satiate the market's demand.

Beyond auctions, what additional strategies should be considered to regulate the gold market?

Given the significant investment returns gold has delivered recently, it's paramount that we consider broader regulatory measures. While the SBV's auctions address supply side dynamics, demand-side measures, such as taxation on gold investments, could deter speculative buying and align gold investment practices with those of other financial assets, which are subject to taxation. The aim would be to establish a balanced and fair market environment that accommodates the interests of investors and the state.

How could such a tax be implemented, especially when traditional gold purchases often lack formal documentation?

The transition to electronic invoicing systems across sectors is crucial. For gold transactions, this shift means every purchase and sale will be properly documented, facilitating fair and efficient taxation.

The implementation of electronic invoicing in gold transactions, a recent SBV initiative, is a step towards ensuring that all market activities are transparently and equitably taxed, aligning the gold trade with other regulated financial activities.

Gold market reforms paramount to stability Gold market reforms paramount to stability

Investigations of gold trading firms are to take place on possible market manipulation amid soaring domestic prices, at the same time as the central bank announced it would resume sales of gold bullion for the first time in over a decade.

Vietnam central bank postpones gold bar auction Vietnam central bank postpones gold bar auction

The State Bank of Vietnam was to auction 16,800 taels of gold bars, branded by Saigon Jewelery Company (SJC), on the morning of April 22. However, an hour before the bid opening time, the central bank announced it was postponing the auction as there were not enough members to participate in the bidding and transfer deposits.

By Thuy Huong

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