MoF slaps down tax moves

MoF slaps down tax moves

The Ministry of Finance has smacked down many National Assembly deputies’ recommendations to reduce value added and corporate income tax rates.

The ministry’s (MoF) Minister Vuong Dinh Hue told the National Assembly that if the value added tax (VAT) and corporate income tax (CIT) were trimmed, the state coffers would suffer big dents.

“Many deputies have suggested that 50 per cent of VAT be reduced. But if we sank the VAT from 10 to 5 per cent, all budget revenue for 2012 would lose VND115.18 trillion ($5.53 billion), equivalent to 15.6 per cent of total targeted state budget revenue earlier adopted by the National Assembly,” Hue said.

“In the absence of this sum, there will be no other sum to compensate for it. Meanwhile, the National Assembly does not allow for a rise in budget overspending, and state spending on social security activities until the year’s end will also likely increase,” he said.

According to the MoF, if the VAT reduction was applied to locally-made products but not to imported products, Vietnam would violate the World Trade Organization commitments on goods discrimination.

Furthermore, if the VAT reduction was applied, it was not sure that enterprises would reduce their sale prices. “We cannot force enterprises to reduce sale prices in line with the VAT decrease,” Hue said.

Hue said despite enterprises’ ever-increasing difficulties, the CIT would only be pared down to 20 per cent by 2020, from the existing 25 per cent level which was “at a low level as compared to the average level of the world’s 27 per cent.”

If the CIT dropped to 20 per cent as recommended by many National Assembly deputies, the state budget would suffer from a loss of over VND20.44 trillion ($982.7 million) for 2012 and VND10.22 trillion ($491.3 million).

Vietnam Customs reported that state budget revenue in this year’s first five months was VND81.5 trillion ($3.91 billion), down 5.7 per cent against last year’s corresponding period. Thus the CIT reduction would also further burden the state budget, Hue said.

However, many National Assembly deputies argued that though the government was exercising its bailout package worth VND29 trillion ($1.4 billion) to help enterprises, such a package would be helpful, within six months only, to many small and medium-d enterprises bogged down in difficulties. Thus, VAT and CIT reductions were a must.

“The National Assembly and the government need to reduce these taxes. This will fuel enterprises with confidence in doing business. Such taxes will have to be reduced soon or late, but now is the best time for reduction,” said Ho Chi Minh City deputy Tran Du Lich.

Hue also said the CIT might be reduced to 22-23 per cent when the Law on Corporate Income Tax was revised next year. Also, the VAT might be reduced for some products in the coming time

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