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Taxes in Viet Nam top regional figures
While economists and enterprises complain about the increasing burden of taxes and fees, financial officials claim that they are at a regional average level.
The Viet Nam 2012 macro-economic report released by the National Assembly's Economic Committee said that State budget revenue from taxes and fees from 2007-11 accounted for 26.3 per cent of the Gross Domestic Product (GDP).
This was far higher than those recorded in other countries. The figure in China was only 17.3 per cent, Thailand and Malaysia, around 15.5 per cent, and India, 7.8 per cent.
Vietnamese taxpayers have to pay higher personal-income taxes than their counterparts in China and Thailand, although their incomes are much lower, the report, sponsored by the United Nations Development Program (UNDP) in Viet Nam, claims.
Most local businesses have to pay a fixed corporate income tariff of 25 per cent, while the duties imposed in other countries range between two and 30 per cent.
In fact, amid the downturn of the economy, the burden of taxes and fees is hitting enterprises and households harder than ever.
Nguyen Khanh Toan, chief of the Viet Nam Automobile Transport Association's Secretariat, said that transport firms were burdened with at least 13 types of taxes and fees, such as corporate income tax, environment protection tax and, road tolls.
They does not include a road maintenance fee, which is due to be introduced at the beginning of next year.
Under current regulations, the distance between two road toll stations must be 70km, but in some areas, they are only 10 to 20km apart.
The association asked the Ministry of Finance to consider cutting some kinds of tax to help transport companies and benefit consumers, but the ministry did not respond, VATA chairman Nguyen Manh Hung said.
According to the Viet Nam Association of Seafood Exporters and Processors (VASEP), seafood companies have to pay from VND5 million ($238) to VND10 million ($476) for one container to be quality-checked before exported.
VASEP general secretary Truong Dinh Hoe said this was unnecessary. Instead of checking every batch of goods, authorities could inspect on production lines, which would help reduce costs and speed operations.
However, the Ministry of Finance does not seem to agree.
In a recent government meeting, Deputy Minister Vu Thi Mai said that since 2003, Viet Nam had removed 340 types of fee, and the comparison between Viet Nam and other countries should be on the same basis.
She said tax revenues in other countries did not include collections from crude oil and land-use tax as in Viet Nam.
Besides, other countries only calculated their central budget incomes, but Viet Nam included the incomes of both central and local budgets, she added.
Therefore, Viet Nam's tax-revenue-to-GDP ratio over the past 20 years should be between 12 and 14 per cent, which could be considered "average" compared to the world, the deputy minister said.
Le Dang Doanh, former director of the Central Institute of Economic Management (CIEM), said such a high tax and fee framework proved the Government was spending too much.
"Looking at the ratio, we can assess the efficiency of the Government's works. If it spends in an inefficient way, it will harm economic growth," he said.
Pham The Anh, one of the report's authors, said sources of tax and fee collection mainly came from value-added tax, corporate income tax, import-export tax and special consumption tax imposed on imported goods.
The contribution of import-export taxes and a special consumption tax imposed on imported goods had increased from 10 per cent of total tax revenue in 2006 to 14.5 per cent in 2010.
The dependence on this source of collection would probably make the country's budget deficit more serious in coming years when tax cuts were implemented in line with WTO commitments.
Doanh said taxes and fees were the main source of the State budget collection, but increases did not always expand the State budget.
He said high levels of taxes and fees would encourage taxpayers to seek ways to evade them, causing losses to the State budget and overall price rises.
The report said price transferring enabled companies to evade tax in the foreign-invested (FDI) sector. "High duties have forced FDI businesses to transfer their profits to other countries to enjoy lower rates," the report said.
The State should study and impose optimal tariffs and fees to get the highest revenue while still encouraging enterprises to be more productive.
According to CIEM deputy director Vo Tri Thanh, corporate income tax should be reduced by 5 per cent to 20 per cent – the average level of the region – to stimulate enterprises. Besides, value-added tax should be slashed from 10 to 7 or 8 per cent.
Pham The Anh said reducing the budget deficit through raising tariffs was not a sustainable policy. The increase in State budget collection was only realised by raising tax regulation compliance and preventing smuggling.
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