Vietnam - Government urged to cut taxes to rescue businesses

VietNamNet Bridge – Will the government think of reducing tax rates or applying some measures to rescue businesses like it once did in 2009, when enterprises bogged down in difficulties?

>> 12,000 businesses died, others dieing, shouting for help

The purchasing power in the market increased only by 5 percent in the first three months of the year, a very low increase if compared with the average increase of 10 percent in the same periods of the last years. Meanwhile, 12,000 businesses have got reportedly bankrupted or dissolved.

Businesses take loss, but State’s tax collection keep increasing

The State budget forms up primarily from the domestic collection sources. Especially, the receipts from crude oil make up 21 percent of GDP, while the receipts from non-oil sources, including the tax and fee collection, make up 22 percent of GDP.

According to the Ministry of Finance, in 2007-2010, despite the economic difficulties, the receipts from tax collection all exceeded the yearly estimates, increasing by 25.8 percent year after year.

Corporate income tax, VAT and import, export tax collections are the main sources of income for the state budget. These are also the biggest amounts payable by enterprises. Besides, they have to pay some other kinds of taxes.

Corporate income tax collection brings 30-33 percent of the total receipts from taxes, and 20 percent of the total state budget collection. VAT collection brings 20-25, while import and export tax 10 percent of the total receipts from taxes. This spells that any changes in the tax policies would have big impacts on the business environment and the development of the business circle. Moreover, the tax reduction, increase or exemption would also make the state budget enlarge of narrow.

In 2009, when Vietnamese businesses bogged down in difficulties, the government made a timely decision to exempt VAT and corporate income tax and delay tax payment. The measures then actively helped recover the market.

The current situation is no less difficult than in 2009. The GDP in the first quarter of 2012 grew by four percent only, while the purchasing power on the market increased by 5 percent in comparison with the same period of the last year, while the credit growth rate was a minus figure.

According to the National Financial Supervision Council, the high interest rates and financial costs have made Vietnamese goods’ prices higher by 2-2.8 percent than other regional rivals.

Not only the domestic demand, but the export markets have also been narrowed. The export turnover of state owned enterprises in the first quarter of the year was 9 billion dollars, seeing no increase in comparison with the same period of the last year. Meanwhile, foreign invested enterprises had the export turnover increasing by 43 percent.

While difficulties come from all sides, businesses can only delay the tax payment for the first quarter until the end of July. However, the tax payment delay cannot help businesses much, because small and medium enterprises do not have profits to be taxed.

Therefore, the National Financial Supervision Council has suggested that the government should help ease difficulties for enterprises by cutting tax. The council said that if the proposal is not approved, the production and business would not recover, which means that businesses would suffer.

The tax consultation association requested the government many times to submit to the National Assembly the plan to reduce the corporate income tax from 25 percent to 20 percent in 2012-2015. And it is now the right time for the Ministry of Finance to accelerate the tax reduction process. Economists say the corporate income tax should be lowered to 23 percent to help enterprises to overcome difficulties.

Source: TBKTSG

Business & Investment Opportunities 
YourVietnamExpert is a division of Saigon Business Corporation Pte Ltd, Incorporated in Singapore since 1994. As Your Business Companion, we propose a range of services in Strategy, Investment and Management, focusing Healthcare and Life Science with expertise in ASEAN. We also propose Higher Education, as a bridge between educational structures and industries, by supporting international programmes. Many thanks for visiting www.yourvietnamexpert.com and/or contacting us at contact@yourvietnamexpert.com