Ministry considers lifting ceiling on advertising expenses

Ministry considers lifting ceiling on advertising expenses

The Ministry of Finance (MOF) is considering removing a regulation that requires businesses to pay no more than 15 percent of total expenses on advertisements.

A senior official of the ministry has revealed that MOF will ask the National Assembly to reduce a number of taxes and fees, including the 15 percent ceiling expenditure on ad and marketing activities.

The business community is excited about this prospect, as they did not think MOF would give the nod on such a “delicate matter”. The ministry, ignoring businesses’ complaints, has been insisting on maintaining the cap for many years.

Deputy Minister of Finance Do Hoang Anh Tuan at a government press conference in late August, promised to make several amendments to the tax laws, but said the regulation on the 15 percent ceiling would be unchanged.

However, in the latest news, deputy director of the MOF’s Tax Policy Department Pham Dinh Thi confirmed with Thoi Bao Kinh te Saigon that MOF has finally agreed to remove the 15 percent cap.

However, it is the National Assembly which will make the final decision on whether to remove the regulation.

The business community has been tenacious in its efforts in recent years to convince MOF to give businesses the right to decide how much they should pay for advertising, marketing and conference activities.

MOF believed that it was necessary to set a limitation on businesses’ expenses to prevent them from committing fraud and evading tax.

Meanwhile, businesses argued that they must have the right to decide what to do with their money. They said that every business has to think carefully about expenditure items, and they would not foolishly spend too much on ads and marketing, as this would increase production costs and weaken product competitiveness.

Analysts also pointed out that the same ceiling of 15 percent for all businesses was unreasonable. Startups and new players in the market tend to pay more for advertisements to popularize their products, which are unfamiliar to customers.

Meanwhile, other businesses may allocate smaller budgets for ad campaigns.

MOF, after a recent survey on the taxation system used in 50 countries, has found that Vietnam and China are the only two countries that have set up caps on expenses on ads. However, China is using a different mechanism: Chinese businesses can spend up to 15 percent of their total receipts, not 15 percent of their total expenses.

However, analysts said “better late than never”, predicting that the national economy would benefit greatly from the cap removal. This would help increase the revenue for the state and at the same time help Vietnamese manufacturers improve their competitiveness.

They also believe this would encourage foreign-invested enterprises to make products in Vietnam instead of importing them. At present, as they cannot spend much on ads, they have to pay higher production costs.

Advertising firms have especially applauded the decision. As businesses can allocate bigger budgets for ads, the firms would get more jobs and would pay higher taxes to the state.

vietnamnet