Traders focusing on quick gains express concern over potential risks due to proposed changes in securities taxes

In a move that could reshape Vietnam's investment landscape, the Ministry of Finance has proposed a 20% tax on net profits for individual investors in the country's stock market. This new tax policy, if implemented, could have significant implications for investors, particularly in the context of Vietnam's push to upgrade its stock market to emerging market status.

Nguyen Son, chairman of the Vietnam Securities Depository and Clearing Corporation, supports this tax, arguing that it better reflects investment outcomes and encourages long-term, effective, and transparent investments. However, the proposed tax could affect investor sentiment, especially when financial literacy is still low and investment options are limited, according to Nguyen Kim Lien, a personal finance expert.

Pham Tien Dat from the Institute of Economic and Financial Policy and Strategy under the MoF emphasizes the need for a comprehensive reform plan. This plan should include distinguishing between listed and unlisted assets, differentiating between individual and institutional investors, and domestic and foreign investors. It should also encourage long-term accumulation, invest in data systems, and ensure a reasonable, transparent transition roadmap.

The proposed tax rate of 20% is not unprecedented. In developed markets like China, the US, Japan, Germany, and France, tax on net profits ranges from around 15-30%. However, in the context of Vietnam's stock market, which has returned an annual average of 9-12% for the past 15 years, a 20% tax could potentially make the market less attractive, with a net return estimated to be just 8-10%.

Short-term traders, such as Tran Manh An and Le Thanh Vinh, express concern that the proposed tax may negatively impact their post-tax profits, particularly in volatile market conditions. Tran Manh An, an investor from Hanoi, states that a 20% tax on profits could result in him moving to safer investments like savings or suburban land. Le Thanh Vinh, another investor, suggests that the new tax could discourage risk-taking among retail investors and lead them to shift to rental property.

Lawyer Nguyen Thanh Ha from SB Law considers the proposed 20% tax high for long-term investing under the current personal bands of 5-35%. Moreover, if tax policies are not carefully balanced, capital flight from the stock market to other investment channels could occur, affecting market liquidity and businesses' ability to raise capital.

It's worth noting that since 2007, Vietnamese individual investors have paid a 0.1% flat tax on the total sale value of transactions, regardless of profit or loss. Indonesia, the Philippines, and Thailand apply lower securities taxes than Vietnam's proposed rate.

In conclusion, the proposed 20% tax on net profits for individual investors in Vietnam's stock market is a significant development. While it aims to encourage long-term, effective, and transparent investments, it could potentially impact investor sentiment and behaviour. A balanced and comprehensive approach to tax policy reform is crucial to strike a balance between fostering growth, elevating the capital market, and building investor confidence.

Traders focusing on quick gains express concern over potential risks due to proposed changes in securities taxes