Vietnamese authorities plan to impose taxes on revenues from trading shares in a bid to cool the country’s stock market, state newspapers reported on Tuesday.

Vu Van Ninh, finance minister, told members of the National Assembly the tax would mainly target income from short-term investments, and would “limit and control credit being shifted to investing in stocks,” according to state media.

Tax experts said authorities have not yet decided on a time frame, nor whether such a tax would be adopted as part of planned reforms of personal income tax laws, expected by 2009, or more urgently.

The tax discussions come amid Communist authorities' growing concern at the current middle-class stock market frenzy. Vietnam’s main stock index rose by 144 per cent in 2006 and has risen 50 per cent so far this year. Even as other Asian markets have wobbled in recent days it has continued to strengthen, rising 5.9 per cent last week.

Hanoi recently ruled out a central bank proposal to impose a withholding tax on short-term foreign capital inflows, fearing it could trigger a damaging market crash similar to one in neighbouring Thailand.

Instead, authorities seem to be focusing on taxes to dampen speculative fever.

Taxing capital gains was always part of Hanoi’s long-term strategy, which also includes a total overhaul of personal income tax laws. But Fred Burke, an attorney at Baker & McKenzie, said, “the heat in the market probably stimulated their thinking to get it done sooner rather than later.”

Vietnam’s existing personal income tax rule dates back to the early 1990s, when the Communist-ruled country was taking tentative steps to liberalise its state-controlled economy.

Only salaries are now taxable, while profits from stock or land trading remain tax-free. In the early days of the six-year old stock market, authorities wanted to give investors incentives to venture into the then still unfamiliar equity market. But in the current stock stampede, authorities appear to have concluded that such incentives are longer required.

“You have this anomalous situation,” said Mr Burke. “You are in a socialist country where people who earn their living through the sweat of their labour get taxed as much as 60 per cent, and meanwhile, you have guys running around speculating in land, speculating in shares – engaging in pure capitalism – and they are tax free.”

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