Tax on tax

(Baonghean) -The proposal to consider taxing income on savings deposits of over VND500 million, recently submitted to the Government by the Chairman of the Ho Chi Minh City Real Estate Association (HoRea) with the aim of redirecting cash flow into investment in production and business, including real estate rescue, is receiving strong reactions from the public, credit institutions and tax authorities.

This proposal is mainly aimed at removing difficulties for current production and business, and the real estate market is not out of the picture. Responding to the press, recently, the leader of HOREA said that the fact that people deposit money in banks, some depositing billions of dong, even tens of billions of dong, without having to pay any tax is "too unreasonable". Therefore, taxes must be imposed to supplement revenue for the budget, encourage investment, instead of depositing money in banks to earn interest, it is necessary to mobilize resources to enrich the country, families, and individuals.

When asked for his opinion on this issue, the director of a commercial bank in Vinh City (who asked to remain anonymous) said that people's savings are lent by banks to businesses to invest in developing production and business. If taxes are imposed, people will no longer save, and banks will lack deposits, so where will they get loans for businesses to invest in production? "We are proposing many solutions to attract capital, increase mobilization from residents and organizations, but we have not finished yet. Now we are imposing taxes, I am afraid that not only banks will have difficulty but also the economy. In addition, it is not difficult to circumvent the law, instead of depositing 500 million VND, what if customers deposit 499 million VND; or separate deposits at many banks, how can we manage it?" - this person wondered.

Working at Nghe An Investment and Development Bank.

Ms. Ta Thi Luong - Deputy Head of Propaganda and Taxpayer Support Department (Nghe An Tax Department) said: Taxing interest on savings deposits is inconsistent with the law. Personal income tax in 2012 does not stipulate it and the amended Personal Income Tax Law effective from July 1, 2013 also does not stipulate it.

Mr. Minh - an officer of SHB Bank Nghe An branch said that, from a theoretical perspective, there is no basis for taxing, if we want to calculate tax, we have to amend the Personal Income Tax Law. From a practical perspective, savings deposits are mostly personal savings, salaries, pensions, and people's sweat to invest in their children's education, in case of emergencies... At SHB Bank Nghe An branch, from the beginning of the year until now, the mobilization has reached nearly 1,400 billion VND, but mainly from people's savings, small deposits; there are not many deposits from organizations, enterprises and large deposits are mostly non-term deposits, temporarily idle arising in the production and business process. “In 2012, inflation reached 8.4%, the current savings interest rate is only 8%, saving is currently difficult to be considered a good investment channel and many people tend not to save but invest in gold and dollars. Assuming the proposal of the Real Estate Association is implemented, it is very likely that people will invest their bank savings in dollars and gold and if so, it will be much more dangerous for the economy”, commented a representative of SHB Bank Nghe An branch.

Mr. S. - a retired cadre in Yen Binh block (Hung Phuc - Vinh city) shared: After retirement, he and his wife saved a sum of money, along with the money their children sent abroad to their parents to support them in their old age. They put this amount of nearly 1 billion VND in savings, which is both safe and profitable. If this amount of money is taxed, he thinks it is unreasonable.

Will taxing savings deposits break the “iceberg” of the real estate market? (illustrative photo). Photo: HOANG VINH

In fact, most workers, civil servants, and retirees who do not know how to do business put their savings in banks and cannot be encouraged to use their capital for business and production. Moreover, people have already paid personal income tax once, and now they have to pay income tax on their savings, which is "tax on tax". When asked about the feasibility of the proposal of the Ho Chi Minh City Real Estate Association, the leader of the State Bank of Vietnam, Nghe An branch, asked not to comment further on the issue of taxing bank deposits, but only said that to remove difficulties for production and business, support the market, and resolve bad debts, it has been discussed thoroughly in Resolution 02 of the Government.

This directive has been issued promptly with reasonable and synchronous solutions. Thus, actively and drastically implementing Resolution 02, the socio-economic picture will be improved, but if we also tax savings deposits, it will negatively affect the capital mobilization and lending activities of banks. And thus, the lifeblood of the economy will be affected, making production and business enterprises more difficult and the real estate iceberg at this time will not only not melt but also potentially freeze further.

Article and photos: Thu Huyen