Under pressure companies in for a break

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Last week, the ministry (MoF) submitted its land rental reduction proposal in favour of businesses to the prime minister.

Accordingly, the MoF aked the government for 50 per cent land rent reduction for firms during two years.

The MoF’s move came on the back of scores of firms voicing concerns over new land rent calculation method regulated in governmental Decree 121/2010/ND-CP dated December 30, 2010 which came into force on March 1, 2011.

In light of the decree, land rental taxable price is set close to market-based land use rights transfer prices with collection levels being 1.5 to 3 per cent of actual transfer prices.

According to Haiphong-based Hong An Equipment Company Limited chairman To Ngoc Thach, the land rental the firm had to pay in 2011, based on Decree 121, 18 times more than in 2010.

Director Truong Thuy Nga at Hanoi-based Khuyen Luong Port Company Limited said the firm was offering services on its leased 99,140sq.m space with 40 per cent of the area earmarked for building roads and relevant infrastructure.

In 2004-2005, its land rental was VND150 million ($7,240), surging to VND800 million ($38,600) in 2006, then VND1.045 billion ($50,480) in 2009 and VND1.3 billion ($62,800) in 2010. Its 2011 land rental climbed to VND4.3 billion ($207,700) based on latest notice from the tax body.

“Our land rental leaped several dozen times within just seven years, creating a turnaround in the firm’s operation. The company would incur losses of at least VND3.7 billion ($178,700) this year with this huge land rental,” said Nga.

Besides, firms complained Decree 121 was applicable to local firms only, meanwhile foreign-invested firms were just required to pay land rentals once for 50 year land lease, triggering inequality in land rental between domestic and foreign-invested firms.

Relevant to the MoF  proposal, Dai Duong chairman Nguyen Sy Hung said once ratified the MoF proposal would help firm better withstand this tough time, strengthen production and trading activities and ensure labourers’ employment.

According to the MoF’s Public Asset Management Department deputy head Le Ngoc Khoa, if the proposal was green-lighted, it would help save enterprises around VND720 billion ($34.78 million) worth in land rental each year, while not having big impacts on state coffers.