Experts call for extension of tax support

Pham Thu Huyen, owner of a garment factory in Hanoi’s Hai Ba Trung district, has been worried about how to deliver salaries to hundreds of workers during the Lunar New Year period.

“Instead of working overtime all day and night like a year ago, we have had too few orders due to the sharp drop in demand in the last few months. I have no profit to share with workers, and I am looking to borrow from somewhere else,” said Huyen.

Huyen is also considering scaling down the company if the market remains gloomy after the festive break.

Lack of overseas demand is cutting into operations of many businesses, Photo: Le Toan

This is the common status of countless companies at this time. Many cannot survive, with little work coming in over the past several months. In a report from the Ministry of Planning and Investment in December, over 3,770 enterprises registered to suspend business for a definite time, up by a quarter on-year. In 2022, the number of enterprises withdrawing from the market was around 143,200 enterprises, an increase of 19.5 per cent on-year.

Dau Anh Tuan, deputy general secretary of the Vietnam Chamber of Commerce and Industry (VCCI), said that businesses are struggling with a decline in foreign demand, the delay of payments from partners, and large inventories. The cash flow of enterprises has been exhausted after the restrictions of the past few years.

“At present, they need much more capital for production and business activities, as well as to buy raw materials to prepare for production in early 2023 – but they cannot access credit and the interest rate is too high,” said Tuan.

Mac Quoc Anh, vice chairman of the Hanoi Association of Small and Medium Enterprises, added that enterprises have been attacked by rising interest rates, soaring input fuel costs, and a rise in the exchange rate by more than 7 per cent compared to the end of 2021.

“Most supportive policies expired at the end of 2022, such as reducing VAT by 2 per cent and extending tax and land rent, among others. Now, if the environmental protection tax imposed on petrol increases by just a few thousand VND, it will be a strong shock to the market,” said Anh.

Pham Viet Dung, chairman of the Vietnam Aviation Business Association (VABA), hopes for a further reduction in the environmental protection tax on jet fuel in 2023, like the rate in 2022.

“In the context that the world oil prices have often uncertain movements, the transportation business, especially air transport, is facing many risks,” said Dung. “If the price of oil increases by $1 per barrel, Vietnam Airlines will lose around $6.5 million in cost. Therefore, the continued reduction of tax on jet fuel as in 2022 will contribute to reducing airline fares to support consumers.”

Dung proposed to the state to continue extending tax reduction policies for petrol in 2023 to control prices and that of other goods and services.

“Recently, the Ministry of Finance (MoF) has proposed four scenarios of environmental protection tax for petroleum products according to the world’s crude oil price movements. However, in the context of economic reality, if the support policy is being considered for too long, production and business will miss the opportunity to recover, and cannot reach sustainable development,” said Dung.

Tuan from the VCCI said that financial policies play an important role in the recovery of the economy. “While 2023 contains numerous risks, the National Assembly and the government should consider and retain some supporting policies, like continuing to extend the 2 per cent VAT reduction,” he said. “This is an important and highly effective policy that not only supports consumers, but also promotes vibrant production and business.”

Can Van Luc, member of the National Financial and Monetary Policy Advisory Council, agreed that it is necessary to continue extending tax exemption and extension policies this year.

“The rate of businesses temporarily closing or suspending business is higher than the previous year, which demonstrates that a full recovery is not yet here,” Luc said.

“What is more, the high-interest expense pushes businesses into burdens, and the debt repayment obligation, and cash flow of enterprises this year will be even more difficult. The MoF should propose the continuation of exempting and extending some types of taxes, fees, charges, and land rent,” Luc recommended.

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