MoF denies banks tax breaks despite restructuring efforts
MoF denies banks tax breaks despite restructuring efforts
The Ministry of Finance has refused to offer preferential tax policies to credit institutions that are participating in the restructuring of the banking sector.
Deputy finance minister Do Hoang Anh Tuan said that the tax exemption or reduction was not in accordance with Viet Nam's regulations as well as international rules.
Merger and acquisition (M&A) were the business activities of banks so there would be no reason for the tax preference, Tuan said, and added that credit institutions would not have to pay taxes unless they make a loss or break even after selling mortgaged assets that are non-performing loans (NPLs).
The move was made after some credit institutions and financial companies requested the Government to exempt or reduce taxes, mainly corporate income tax, for them after their M&A with ailing or smaller credit institutions and financial companies.
Last week, Sai Gon-Ha Noi Joint Stock Commercial Bank (SHB) was the latest to ask for the tax preferential policy. In a petition to the finance ministry and the central bank, SHB sought a corporate income tax reduction in the first five years after its merger with the Vinaconex Viettel Finance Company (VVF) at the end of this year, citing VVF's large quantum of NPLs.
Besides, SHB also asked for a tax exemption from the Government between 2013 and 2015, three years after its merger with ailing Habubank.
Earlier, at a shareholders' meeting, after approval to merge with the Song Da Financial Company, the Military Bank (MB) also asked for a corporate income tax exemption in the first five years after the merger, which is estimated at roughly nearly VND2 trillion (US$89.28 million).
PetroVietnam Finance Corporation (PVFC)'s case was similar, with a proposal for a tax exemption in the first three years and another 50 per cent reduction in the next two years, after merging with Western Bank. It said that the tax preference would help the new bank improve its performance after the restructuring.
Some experts also said that a tax preferential policy was necessary to encourage the involvement of credit institutions and financial companies in the restructuring of the banking system.
Dang Ngoc Duc, director of the Finance Banking Institute under the National Economics University, said that after the M&A, credit institutions should receive reduction or exemption in corporate income tax.
Besides, Duc said, measures on tax and fee reduction or exemption related to trading of NPLs and mortgaged assets that were restructured should also be taken.
