Helping hand needs to be measured

April 18, 2013 | 10:29

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The National Assembly (NA) Standing Committee will tomorrow comment on the NA draft resolution on tax measures to support production and business. Ministry of Finance’s (MoF) Tax Policy Department deputy head Nguyen Van Phung sheds some light on the proposed tax support.

What are some of the proposed supportive tax measures?

It detailed some policies regulated in Resolution 02/NQ-CP dated January 7, 2013 presenting measures to tackle difficulties in production, business, support market and clear bad debts. Particularly, the MoF proposed slashing 50 per cent of input value added tax (VAT) from July 1, 2013 to June 30, 2014 to social housing investment and trading as well as to sale and lease of apartment units with floor areas less than 70sqm costing less than VND15 million ($715) per square metre and lowering 30 per cent output VAT within one year from July 1, 2013.

The MoF also suggested applying preferential 20 per cent corporate income tax (CIT) from July 1, 2013 to small- and medium-sized businesses which employ less than 200 labourers and generating revenue below VND20 billion ($960,000) per year and applying 10 per cent CIT to incomes raised from social housing investment and business as well as honouring preferential tax rates on expanded projects.

It seems most measures aim to rescue the property market. Is this true?

A property market upswing could contribute a discernible part to national economic development and to the state budget. Thereby, when this field faces hardships, the state needs to apply suitable measures striving for market revival. The state uses diverse tools, such as fiscal and monetary policies to support particular fields and areas facing hardships in production, consumption or export.

Supportive policies target stimulating production, business and upholding market but not simply assisting property firms. When the property market is revived, it will develop associated sectors like construction, building material production and trading, paving the way to reduce inventory levels, enlarge production and reduce bad debts.

How is the social housing problem to be handled?

The VAT levies on consumers, so that lower VAT policies in the NA draft resolution are to help low-income consumers get access to more affordable social housing. However, to radically address social housing issue there needed to be a comprehensive suit of measures, a lower tax rate is of great importance. Property prices will go down following lower tax rates, leading to surging market transactions. If the resolution was passed by the NA, it would be like an arrow reaching several targets - helping tackle social housing problem, address market difficulties and breed state budget sources.

Will the proposed one year tax break be enough to support firms amid current market hardships?

These are short-term solutions, so they should be based on actual situation and sometimes a longer time brings counter effects. If reduced tax policies are extended, consumers may think property prices will go further down next year and the following year, and they may not step into market. These measures, once applied, will hopefully bring a clearer picture to Vietnam’s property market and economic standing next year.

By Manh Bon

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