Tax relief gets the green light

However, several deputies remain cool on the effectiveness of the new measures.

Despite giving the green light to a government proposal to exempt individuals who currently pay personal income tax (PIT) at the lowest taxable threshold, the deputies said the figures would not make life much easier for difficulty-striken people.

Earlier, the government proposed that the National Assembly  exempt individuals earning less than VND9 million ($440) per month from PIT from August 1 till the end of 2011.

Phung Quoc Hien, chairman of the National Assembly Finance and Budget Committee, said the policy,  would have little effect.

Hien said for a person with an income of VND10 million per month, after subtracting the PIT threshold of VND4 million and the reduction for two dependents of VND3.2 million, the taxable income was VND2.8 million.

With the tax rate at the first level of 5 per cent, the payable PIT would only be VND140,000 which was not enough to make a significant difference to their finances.

Speaking about the Ministry of Finance’s (MoF) proposal to exempt the 5 per cent PIT on dividends earned from stock investment, Hien said this needed to be reconsidered because it was business activity for profit.

“In principle, operating businesses with profit have to pay tax. Therefore, an income tax exemption for stock investment is not fair for other business sectors,” said the National Assembly Finance and Budget Committee’s appraisal report.

Meanwhile, many deputies also turned up their noses at a proposal to extend the corporate income tax (CIT) slash by 30 per cent  for enterprises already subject to such tax holidays in 2011.

There will be 303,200 enterprises seeing a reduction in CIT in 2011 with the subsequent state budget shortfall being around VND3,700 billion ($178 million).

But the National Assembly Finance and Budget Committee proposed only considering a CIT exemption for around 236,500 small- and medium-sized enterprises (SMEs) and not for all who were enjoying an extension of tax holidays.

“Enterprises registering a profit will have to pay tax, while currently enterprises in difficulty are those without any profit,” said the committee’s report.

“The current difficulty [we need] to address is to create favourable conditions for enterprises to access loans with reasonable interest rates. Besides, under the Law on Tax Management, tax reduction and exemption should only be considered for specific subjects, therefore, both tax extension and reduction over a wide area will create an unsound precedent in law implementation,” said the report.

Chairman of the National Assembly’s Legal Committee Nguyen Van Thuan said a CIT reduction would not address the main problem enterprises faced.

“The big difficulty enterprises face is [lack of] capital and the high interest rate is a pressing matter which remains unsolved,” said Thuan.

Meanwhile, MoF Minister Vu Van Ninh said these were temporary solutions for the shortfall in state budget revenue due to tax reduction. The solutions are based on estimations of a difficult situation in the last months of this year.

“The state will focus on solutions such as increasing collections from export and import taxes,” said Ninh.