Vietnam increased the import tax on gold from 0.5 to 1 per cent per tael (one tael is equal to 1.2 ounces).The new tax will come into effect on May 26. This is viewed as a move to reduce gold's contribution to the overall trade deficit and to add money to the national budget.
The new tax will be levied on unprocessed gold, semi-finished products, and gold powder.
Two weeks ago, the Viet Nam Association of Finance Investors (VAFI) asked the Finance Ministry to raise the import tax on gold to 10%-20% per tael.
VAFI reported that in the first four months of this year, the country already paid $1.2 billion to import about 43 tons of gold, nearly half of volume of last year.
The State Bank of Viet Nam's decision to allow gold dealers and banks to import an extra 3.5 tons of the precious metal this year has also been blamed for the strong demand for the dollar. The local media rumored that gold was selling slowly because so much was available. They said any increase in gold tax would not affect imported gold prices but could boost prices of domestic gold.
Another concern is about gold smuggling. The lifting of the tax is also expected to leave more US dollars in Vietnam at a time local banks are said to be short of US dollars for business.
However, gold dealers were skeptical about whether limiting gold imports would actually achieve this. If gold smugglers are forced to buy greenbacks at a higher exchange rate than banks, people would be tempted to sell to them, instead of banks. Smugglers can then use these dollars to import more gold - illegally. (Viet Nam News)