Personal Income Tax May Deter Deposit Inflow

Commercial banks in Vietnam are worrying that levying personal income tax (PIT) on interest from bank deposits will deter depositors.

 

Under the new PIT draft law which has recently been made public by the Ministry of Finance, those who get interest sum of VND4 million or VND5 million a month will be taxed 5 per cent and more.

 

Tran Hai Anh, Deputy Director General of Phuong Nam Bank, said that the taxation will prompt people to seek for other investment channels instead of depositing in banks.

 

Those, who have idle capital, will save their money in gold instead of depositing at banks, Anh said. However, pouring money in gold is risky, particularly when gold prices have undergone sharp fluctuations in the recent past.

 

Anh added that people may think of splitting their sums of money and then deposit at different banks in others’ names in order to avoid taxes.

 

In another way, commercial banks can offer higher interest rates for deposits to share difficulties with their clients. However, “such a way is infeasible because the banks will have to raise the lending interest rates to cover losses, thus putting more difficulties on borrowers,” said Anh.

 

Available statistics showed that 50-60 per cent of the depositors at the Southern Commercial Joint Stock Bank have deposit sums of more than VND700 million while this figure is 50 per cent at the Vietnam Export and Import Commercial Joint Stock Bank (Eximbank).

 

Nguyen Gia Dinh, Eximbank Director General, said that the same figure is seen in almost all the banks located in big cities, where residents all have high incomes.

 

Dinh said that his bank wanted to make suggestions on the PIT bill, however, he has not received any document from the General Department of Taxation, the compiler of the bill. He has just got the information from local newspapers.