Saving firms still a taxing matter

According to the Ministry of Finance’s (MoF) supporting package for enterprises, it is estimated on average, each enterprise was extended value added tax (VAT) of VND57 million ($2,740) and corporate income tax (CIT) of VND40 million ($1,923).

However, after four months of implementation, the package still could not prevent the bankruptcy and disbandment. In the past nine months of this year, the economy saw  40,190 bankrupted enterprises, up 6.5 per cent compared with the same period last year and nearly the same as the number of enterprises to be newly established each year.

In which, in the third quarter in particularly, the number of enterprises which went bankrupt or did not operate raised by per cent against the second quarter, while the number of enterprises to recover after four months was just 6,100.

"The scale of supporting package is too small compared with the level of difficulties enterprises and people are facing, therefore, its efficiency remained low," said Nguyen Dinh Cung, deputy director of Central Institute of Economic Management (CIEM).

The MoF said up till September, the extended VAT was around VND11 trillion ($528 million) for 190,280 enterprises, the extended CIT was around VND2.9 trillion ($139 million) for 71,640 enterprises. Besides, 2,425 enterprises enjoyed a 50 per cent fall in  land rent with the value of VND250 billion ($12 million). The Vietnam Textile and Apparel Association (VITAS) also proposed the government and MoF reduce or exempt  VAT for 3-6 months for enterprises in this sector.

Currently, textile enterprises are facing a series of difficulties in decreasing orders, while increasing material prices and big number of goods in stock. Moreover, due to a shortage of capital, many enterprises must slow production.

Nguyen Tien Nghi, vice-chairman of the Vietnam Steel Association, said the association had proposed a VAT reduction for a long time.

In the first nine months of 2012, the production and consumption capacity in the steel sector reduced by 10 per cent against 2011.

"To address the problem of high inventory levels, most enterprises found ways to decrease selling prices. However, in such a situation, many enterprises are under the big pressure of losses," Nghi said.

He said that to support enterprises, the state needed to reduce tax instead of tax extensions. It also should push up transportation projects to active the consumption of construction materials. Besides, the banks interest rate should be lowered more to help enterprises overcome difficulties.

In addition, the Vietnam Tax Consultant Association many times proposed the MoF to consider reducing the CIT rate to 20 per cent from 25 per cent to support enterprises overcome difficulties and expand business and production activities

Economic expert Bui Kien Thanh said in this situation, the government should stop collecting new fees to raise budget collection such as road maintenance and vehicle restriction fees.

"The state should actively give VAT and CIT exemption policies for enterprises to strengthen spending, especially spending for production to help enterprises," said Thanh.