Starting this Saturday, the Ministry of Finance will begin to impose a 10 percent export tax on jewelry that has more than 80 percent gold content, despite objection from gold traders.
The tax previously applied to jewelry containing more than 99 percent gold.
According to the State Bank of Vietnam, some traders reprocessed their jewelry products to have gold content of less than 99 percent in an attempt to avoid the tax. As a result, the central bank proposed a change in the policy to stop the practice.
Deputy Minister of Finance Do Hoang Anh Tuan told Thanh Nien that the ministry supported the proposal. Many gold traders had taken advantage of the old policy to avoid tax payments, he said.
Last week the Vietnam Gold Traders Association protested the proposal, arguing that exporters would continue to try to lower their gold content to be eligible for a zero tax rate. If traders cannot make a profit due to higher production costs, they may engage in smuggling, the association warned.
Nguyen Thanh Truc, chairman of Agribank Gold Corporation, said the new tax rate would not affect domestic gold prices, but it could lead to uncontrollable smuggling of the metal out of the country.
Other experts said export restrictions would cause an imbalance of gold supply and demand in the market.
Gold outflows are likely to get stuck and the market will be unmoving, they said.
Gold exports reached US$1.8 billion in the first seven months of this year as traders boosted shipments of the metal to around 36 tons, to take advantage of the gap between local and world prices.
Tran Trong Quoc Khanh, director of the gold trading center at Asia Commercial Bank, said the government wants to restrict gold exports but does not have any plan to deal with the large gold holdings among the public.
The State Bank of Vietnam at the end of April ordered commercial banks to stop lending gold and restrict deposits of the metal. It said the move is aimed to reduce the use of gold as currency in the economy.
Khanh said these policies, together with the change in export tax, look like the government is trying to tell the public that they can buy and keep gold, but at their own risk.
"It's necessary to have a central gold exchange to put individual gold holdings into use," Khanh said. "In the meantime, the government should consider buying gold from the public to increase national reserves, just like other central banks."