Taxes eased to boost business goals

Deputy Prime Minister Vu Van Ninh last week made this pledge to the business community at the Vietnam Business Forum (VBF) in Hanoi. “The government will propose to the National Assembly to revise the CIT Law including lowering the tax rate in 2013,” Ninh told the VBF, a dialogue between the government and the private sector prior to the Consultative Group (CG) meeting of donors.

The government has indicated it would refrain from increasing taxes and fees for enterprises given the current global and domestic economic woes. Moreover, a Corporate Income Tax (CIT) reduction was included in the pathway of Vietnam’s Tax Reform from now till 2020 approved by the government in May, 2012.

Ninh added that the government would also consider slashing other taxes and fees to reduce financial burdens for enterprises.

According to a Vietnam Chamber of Commerce and Industry (VCCI) report, Vietnam’s current 25 per cent CIT rate was higher than other regional countries which decreased the country’s competitiveness to attract investment. Specifically, the CIT rate in Thailand is now 23 per cent, while Japan, South-Korea and Taiwan have 17 per cent for small- and medium-sized enterprises.

The government’s action follows proposals from foreign and domestic business communities for restrictions on taxes and fees. They proposed reducing the CIT from 25 per cent as currently to 20 per cent to encourage investment.

“We believe that a tax reduction would make Vietnam more competitive. The government should take changes in neighbouring countries into consideration when deciding the reduction of the CIT,” said Preben Hjortlund, chairman of European Chamber of Commerce in Vietnam (EuroCham).

Foreign business interests also urged serious reform in Vietnam’s state-owned enterprises (SOEs). Christopher Twomey, chairman of the American Chamber of Commerce (AmCham) Ho Chi Minh City, said despite policy on SOEs reform, this sector still had a disproportionate and negative impact on the Vietnamese economy while it just contributed 22 per cent of gross domestic product (GDP).

The inefficient operations of SOEs, Twomey said, were regarded as the root for macro-economic volatilities. If the problems of SOE management were not addressed, he said, Vietnam’s development would face many challenges.

Ninh said the government aimed to restructure SOEs with the guideline of putting the enterprises in a fair and healthy competitive environment. “SOE equitisation will gear up with a small part of SOEs in some monopoly sectors to be kept, while remaining SOEs to be equitised in 2015-2020,” he added.