Dang Thi Hong Phuong, General Director of Saigon Securities Fund Management Company, said that while securities individual investors do not have to pay personal income taxes until January 1, 2009, investment funds still have to pay 20%, and fund management companies 28%.

Phuong said that with the tax policies clearly encourages individuals to make direct investments instead of authorizing professional funds.

She also pointed out that there is a difference between the tax rate imposed on domestic and foreign funds. Foreign institutions (the institutions which were established in foreign countries and under foreign laws) pay the tax sum = total sales x 0.1%, while domestic entities have the taxable income = sale price – purchase price – expenses, and the tax sum they have to pay is calculated by the taxable income x 20% (20% is the tax rate as stipulated in the Corporate Income Tax).

The difference in tax calculation has been creating an unfair playing field for different investors. A lot of institutional investors have been trying to dodge the regulations by making investments under the names of individual investors in order to avoid tax.

Investors do not want to set up investment funds of companies specializing in securities investments, because they do not like the high tax rates. That explains why Vietnam now has only 15 fund management companies and 20 investment funds, though its stock market has been operational for eight years already. The figures prove to be too small if noting that there are thousands of businesses operational in other fields of the national economy.

In fact, securities investment funds in Vietnam prove to be very small in business scale. The total investment capital of all securities investment funds in Vietnam is just equal to the capital of a medium-scale foreign fund management company in Vietnam.

Experts have pointed out that the lack of professional institutional investors in Vietnam, which can guide the investors on the market, is the main reason behind the unsustainable development of the market.

Nguyen Hoang Hai, Secretary General of the Vietnam Association of Financial Investors (VAFI), said that most individual investors do not have experiences, and they make investments based on feelings. Hai also stressed the need of amending the method of calculating tax on institutional investors.

According to VAFI, two popular methods of tax calculation are being applied in the world 1. tax sum = sale price x tax rate, and 2. tax sum = (sale price – average purchase price) x tax rate.

VAFI thinks that currently, when the OTC market is still not put under the control, it would be better to apply the first method, while the tax rate will be adjusted in accordance with the stock market development in different periods.
Source: DTCK