|Powerful tax breaks have been proposed to sustain essential businesses across Vietnam. Photo: Le Toan |
Over the past three months, Hoang Ngoc Trading Co., Ltd, one of the largest private firms trading in rice in Hanoi, suffered from about VND1 billion ($43,500) in daily losses due to shortages of rice materials.
“All of our suppliers in the Mekong Delta have been unable to transport rice to our facilities in Hanoi,” said director Nguyen Thi Tuat. The company provides rice for many universities, schools, and businesses in the north.
“We have to halt the operations of four mills and are keeping only two, with capacity reduced by 60 per cent,” she said. “Meanwhile, like many others, my company has yet to receive any support from the state. For example, we still have to fully pay assorted taxes, land rental, and bills for electricity and water. We have received no reduction or exemption.”
Meanwhile, Nguyen Truong Khoa, vice director of Truong Khoa Agro Business Co., Ltd. which is one of Hoang Ngoc Trading’s rice suppliers in the Mekong Delta province of Hau Giang, said that his company has halted operations due to social distancing. “Many other firms like ours have had to do so as transportation is impossible now. We have lost about VND500 million ($21,700) a day due to social distancing.”
According to the General Statistics Office (GSO), up to 94 per cent of enterprises nationwide are facing difficulties. In 19 southern provinces and cities which create 44.4 per cent of national GDP, up to 98 per cent of businesses are suffering from heavy losses like Truong Khoa Agro. In the southeastern and the Mekong Delta regions, enterprises are now operating at 5-10 per cent of capacity.
In Ho Chi Minh City alone, nearly 24,500 enterprises withdrew from the market, almost 32,400 firms were waiting to conduct dissolution procedures, and 12,800 businesses were dissolved in the first nine months of 2021.
Also in this period nationwide, just over 90,000 businesses left the market and completed dissolution procedures, up 15.3 per cent on-year.
Prime Minister Pham Minh Chinh last week stated, “The COVID-19 outbreak has seriously affected the performance of all enterprises, as well as the health and lives of people. Many localities have had to apply social distancing including key economic regions and major economic hubs. This has led to negative economic growth in the third quarter of 2021.”
The GSO announced that the economy’s third-quarter economic growth of 2021 reduced by an unbelievable rate of 6.17 per cent on-year, with a grey picture seen in all key fields, including agro-forestry-fishery (up only 1.04 per cent), industry and construction (down 5.02 per cent), and services (down 9.28 per cent).
This is the biggest third-quarter depression since Vietnam’s quarter-based growth statistics methods were applied in 2000. It has led to an on-year growth rate of only 1.42 per cent in the first nine months, far lower than over the past decade.
At the September government press conference over a week ago, Deputy Minister of Planning and Investment Tran Quoc Phuong said through calculations from his ministry, the economy is expected to grow only 3-3.5 per cent this year.
“If the economy’s growth in 2021 hits 3 or 3.5 or 4 per cent, it must be at least 7.06 or 8.84 per cent, respectively, in the fourth quarter,” he said. “To this end, more support must be given to enterprises, and they must perform well with sufficient employees as many industrial zones and industrial clusters in many big cities are suffering from labour shortages. Along with the acceleration of vaccinations, this will help boost economic growth.” In Vietnam’s conditions, each percentage of growth is equivalent to 400,000 new jobs.
PM Chinh said that from now until the year’s end, together with the country’s efforts in fighting against the pandemic, the government will boost the application of all possible measures to remove difficulties facing individuals and enterprises, tap into all resources, and create new momentum for economic growth. This will help bring the economy back to a new normal, with effective control of the pandemic.
According to a fresh survey on business and production sentiment of nearly 5,700 processing and manufacturing firms and nearly 6,200 construction companies in the third quarter of 2021, the current COVID-19 outbreak has severely affected enterprises. Only 13.2 and 25.4 per cent of respondents said that their performance in Q3 is “better than” or “as stable as” that in Q2, respectively. Up to 61.4 per cent of the respondents said their performance in Q3 is “more difficult than” in Q2.
However, up to 73.7 per cent of the surveyed firms believed that in the fourth quarter, their performance will be “far more optimistic” than and “as stable as” that in the third quarter. The rate of those forecasting their performance in Q4 will be “more difficult than” that in Q3 is only 26.3 per cent.
Deputy Minister of Finance Nguyen Duc Chi revealed that the National Assembly Standing Committee (NASC) will officially promulgate a hallmark resolution on a number of solutions regarding tax exemption and reduction for affected enterprises and people in the next few days.
“The resolution is now under consideration before it can be enacted soon under the regulations of the National Assembly and the NASC. The Ministry of Finance has also taken the initiative in submitting to the government a plan to implement this resolution, whose contents have been consulted by ministries, agencies, and localities so that it can be put into practice effectively,” Chi said.
The resolution embraces four solutions. Under the first solution, there will be a reduction of 30 per cent of corporate income tax (CIT) in 2021 for businesses with total revenue in 2021 of not exceeding VND200 billion ($8.7 million), and this sum is down from that in 2020.
CIT payers will not be subject to the requirement of 2021’s total revenue being reduced from 2020 if they have newly established their enterprises, change their business types, and change their ownership forms such as merger, acquisition, division, dissolution, and bankruptcy in the taxable period of 2021. This will cause a VND2.2 trillion ($95.65) million reduction in state coffers.
Under the second solution, there will be an exemption of personal income tax, VAT, and other types of taxes arising from business and production activities in the third and fourth quarters of 2021 for all business households and individuals in all sectors and geographical areas, with all forms and methods of tax declaration and payment.
It is estimated that this policy will deprive the state of about VND8.8 trillion ($382.6 million) in revenues. Currently, a VAT rate of 10 per cent is popular as prescribed in the Law on VAT, which embraces no regulation on exemption and reduction.
Meanwhile, according to the third solution, there will be an average 30 per cent reduction of VAT from September 1 to December 31, 2021 for those operating in many sectors, such as transportation, hotels, catering, tourism, arts and culture, and sports. This solution will create a dent of about VND5 trillion ($217.4 million) in the state finances.
For the last solution, there will be an exemption of delayed payment of tax and land rent arising in 2020 and 2021 for enterprises and organisations (including their dependent units and business locations) that incurred losses in 2020. This policy will lead to a reduction of VND5.3 trillion ($230.4 million) in the state budget.
According to a government report, the total value of all fiscal solutions that have and will be enacted by the NASC and the government in 2021 will be about VND140 trillion ($6.08 billion).
However, like hundreds of thousands of enterprises nationwide, both Hoang Ngoc Trading Co., Ltd in Hanoi and Truong Khoa Agro Business in Hau Giang province are expecting the NASC’s resolution to be implemented soon.
“Despite numerous difficulties, we still have to pay all types of taxes and fees fully,” said Khoa of Truong Khoa Agro Business. “Our hundreds of tonnes of rice are in stock and cannot be sold. Meanwhile, many of our customers like Hoang Ngoc Trading in the north are lacking rice materials.”
According to the GSO, many factories nationwide, especially those in the south, have had to halt their operations as they cannot approach any of their customers, while supply chains have also been broken. Thus, besides offering fiscal assistance to enterprises, accelerating vaccinations and gradually reopening the market is set to help businesses and people to revive some of their activities.