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Tax reductions proposed to ease burden on production sector
Experts have urged the government to make plans to reduce and exempt taxes become realistic, saying that this will be a good solution to ease the difficulties for businesses and encourage production.
Resolution No.11 on solutions to curb inflation and stabilize the macro economy mentions the possibility of reducing or exempting taxes and delaying tax payments in order to help ease businesses’ difficulties.
Corporate income tax high
The government has requested the Ministry of Finance to join forces with other ministries, agencies and localities to draw up plans to exempt or reduce taxes. Businesses may be allowed to delay payment of the taxes imposed on input materials imported to serve production for export in some production fields such as garments, footwear, seafood, cashews, wooden furniture and pharmaceutics.
Pham Chi Lan, a well known economist in Vietnam, who was a Member of the Prime Ministerial Research Team and Deputy Chair of the Vietnam Chamber of Commerce and Industry, said that it is now the time to reconsider some tax policies relating to businesses, including the corporate income tax.
In 2009, when the economic downturn broke out, the government decided to reduce corporate income tax by 30 percent for the fourth quarter of 2008 and the entirety of 2009 for small and medium enterprises. Meanwhile, the remaining 70 percent was to be paid in the next nine months.
Lan said that since businesses are facing considerable difficulties in 2011, the government should think of amending tax policies instead of making temporary tax exemptions or reductions, because the corporate income tax rate in Vietnam is higher than in some other countries.
She stressed that it is necessary to reduce taxes so that businesses have money for their re-investment plans and can create jobs and contribute to the GDP growth. This will have an important significance in the current context when bank interest rates are overly high, which makes it difficulty for small businesses to access bank capital.
But it’s still necessary to thoroughly consider options
An official from the Ministry of Finance said that in principle the corporate income tax in Vietnam will decrease step by step so that businesses can improve their competitiveness and so that the investment environment can become more attractive.
The current corporate income tax of 25 percent is still higher than that of other regional countries, such as South Korea (20 percent) or Singapore (19 percent).
Meanwhile, Dr. Cao Sy Kiem, Chair of the Vietnam Small and Medium Enterprises, said that it is necessary to think carefully when reducing taxes.
In 2009, Vietnam sharply reduced VAT and corporate income tax rates, and delayed the implementation of personal income tax in an effort to stimulate the demand in the economic downturn.
The total waived tax volume was 12 trillion dong which was then used by businesses to expand production and overcome temporary difficulties. At that time the tax reductions plus the four percent interest rate subsidy were the two effective solutions that helped Vietnam overcome the recession. However, Kiem noted that at that time, Vietnam needed to pump more money to stimulate the demand. It was a situation quite different from the current situation, when Vietnam needs to restrict cash in circulation to fight inflation.
Kiem said that if the tax exemptions are applied, they should be applied to some business fields and some kinds of businesses instead of a large scale application.
Businesses are complaining that they are facing too many difficulties, especially when input material prices, fuel prices, electricity prices and dollar prices all have increased.
Deputy Director of the Planning Department under the Ministry of Planning and Investment Nguyen Thanh Hoa has confirmed that big difficulties are ahead and that it is very difficult to fulfill business plans on industrial production.
Tuyet Ngan
vietnamnet
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