Impacts of saving interest tax on Vietnam banking sector

Abstract

The banking sector plays a pivotal role in the economies of all nations, acting as an important bridge in the circulation of capital from depositors to borrowers. Savings deposits from customers not only constitute the main source of capital for banks, but also the basis to generate profits through credit and investment activities. Savings deposit interest rate, therefore, not only plays a role in attracting customers but also an essential element in the financial structure of banks. However, when the government imposes a tax on savings deposit interest, the spill-over effects can have a profound impact on the operations of the banking sector, as well as the behavior of the depositors. The article aims to analyze direct and indirect impacts of savings deposit interest tax policy on the banking sector, and at the same time with the reference from international practices to propose some policy recommendations, especially in the context of Vietnam - a developing economy with an expanding banking system.