Dec 4, 2012

Vietnam - Government promises tax breaks for businesses in 2013

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VietNamNet Bridge - According to Deputy Prime Minister Vu Van Ninh, the Government will soon ask the National Assembly to reduce corporate income tax to below 25 percent.

This message was delivered by Mr. Ninh at the Business Forum, which took place on December 3 in Hanoi. Earlierly, the Chairman of the Vietnam Chamber of Commerce and Industry (VCCI) Vu Tien Loc, as well as representatives of many domestic and foreign enterprises had repeatedly asked the Government to adopt more measures to limit tax-free for enterprises. They especially emphasized the requirement to reduce corporate income tax from the current 25% to 20% to encourage investment.

Talking about this issue, Deputy Prime Minister Vu Van Ninh said that the corporate income tax cut to encourage investment and increase the competitiveness of the economy is in the process of tax reform in Vietnam from now to the year 2020. However, being aware of the difficulties of enterprises, the government would early propose the National Assembly to reduce corporate income tax at the appropriate level right in 2013. At the same time, the authorities will take measures to review and remove some taxes, fees to remove difficulties for enterprises.

Although it has been mentioned for a long time, but this is the first time the Government made a specific route for the reduction of corporate income tax. According to the VCCI, corporate income tax in Vietnam at 25% is higher than the region, which affects the competitiveness in attracting investment. The current tax rate in Thailand is 23%, while Japan, South Korea and Taiwan (China) apply 17% tax rate for small and medium enterprises.

Another concern of investors expressed in this forum is the growth rate of the minimum wage in the business sector of Vietnam is too fast. In this regard, Deputy Prime Minister Vu Van Ninh said Vietnamese income is still very low. According to calculations, with the current wage growth, until 2016, the minimum income of unskilled laborers will meet minimum needs.

Particularly in 2013, the Government is expected to raise the minimum wage by 22-25%. The relevant authorities have recently received petitions of several business associations, in which they proposed an increase of 17 - 18% of minimum wages. "The Prime Minister and the Government have accepted this increase," said Deputy Prime Minister Vu Van Ninh.

"According to calculations, with that adjustment, only about 6.6% of the enterprises will have to adjust their wages since their current level is less than the new minimum wage. The money wage increase accounts for less than 1% of the cost of doing business," Ninh added.

Besides the above issues, in this forum, Deputy Prime Minister Vu Van Ninh also made many commitments to domestic and foreign investors about State enterprise reform, cost management, improvement of labor quality, administrative formalities, etc.

The Deputy PM also confirmed the steadfast goal of Vietnam in the medium and long term is to restructure the economy, but in the immediate future Vietnam will focus on macroeconomic stability and maintaining reasonable growth.

"The government is always interested in business, considers the difficulty of enterprises and investors as its own difficulty," the Deputy Prime Minister said.

Compiled by S. Tung

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