Proposal to lower corporate income tax stokes concerns
Proposal to lower corporate income tax stokes concerns
While the Ministry of Finance has said its proposal to slash corporate income tax for small and micro enterprises will help the firms grow, concerns are rife that the tax cut may bring about adverse effects.
Hoang Van Cuong, a member of the National Assembly's Finance and Budget Committee, told Nguoi Lao Dong newspaper on July 24 that it is essential to adopt policies that help small and micro firms grow, including tax cuts or exemptions.
However, according to Cuong, the tax cut is not an optimal solution to support the growth of firms. He voiced his concern that the move would lead to firms making little headway and deciding against expanding their businesses, in order to enjoy the tax incentives.
Competent agencies must organize activities to help newly-established firms tackle common obstacles, such as ways to do business effectively, or give advice on how to achieve strong growth, he said.
Speaking on the pressure the tax cut would create on the State budget, Cuong said, that the drop in budget collection would not matter, as the State would reap high tax revenues in the future, if the tax cut successfully enables small and micro firms to expand their operations.
Ly Thanh Sinh, director of Minh Long Hung Co. Ltd in HCMC, said the tax cut would only act as a stimulus. In reality, many firms intentionally make incorrect tax declarations, so the corporate income tax reduction would not be completely effective in helping firms improve their business results, Sinh said.
For small firms to achieve further growth, aside from the tax reduction, competent agencies need to issue transparent, stable policies, adopt streamlined administrative procedures, and tighten regulations on intellectual property rights in business so that small firms can make long-term investments, Sinh said.
According to Nguyen Minh Nhan, director of HCMC-based Vuong Tron Trading Company, the tax reduction, from the current 20% to 15% for companies with annual revenues of less than VND3 billion and no more than 10 full-time employees with social insurance, is seen as modest.
Also, only profitable firms are subject to corporate income tax, he said. Accordingly, the adoption of the tax cut should come with other stable policies that create good conditions for companies to develop. The tax cut makes sense only if companies generate profits, Nhan added.
Earlier, the finance ministry had released a draft resolution on corporate income tax policies to boost the growth of small and micro firms, inviting feedback.
The ministry’s proposal also envisages a separate rate of 17% for companies with annual revenues between VND3 billion and VND50 billion and less than 100 employees.
