Additional fiscal measures to draw along hard-hit stakeholder groups

Apr 6th at 17:01

06-04-2020 17:01:22+07:00

Tormented by growing losses to the economy, the Vietnamese government is about to offer another fiscal package worth billions of US dollars for those hit hard by the global health crisis.

Government measures are aimed and providing relief for businesses, organisations, and workers, Photo: Le Toan

Prime Minister Nguyen Xuan Phuc has ordered the Ministry of Finance (MoF) to design a huge fiscal deal many times higher in value than the existing package of VND80.2 trillion ($3.49 billion) carved in the draft decree on extending payment of taxes and land rental which the ministry submitted to the government for approval.

The highlights of the new fiscal package is that in addition to supporting enterprises, it will also assist labourers that have become unemployed due to COVID-19. It will also cover delayed payments of social insurance, unemployment benefits, and trade union fees. In addition, the government will also consider preferential loans for enterprises to pay salaries for employees.

“When this new policy is implemented, it will benefit millions of labourers,” said PM Phuc.

He also ordered the Ministry of Labour, Invalids, and Social Affairs and localities to make assessments and calculations on the number of such unemployed people before the new fiscal arrangement can be implemented.

“COVID-19 has taken a heavy toll on all facets of the economy and society. Business and production activities are hit the hardest. Almost all state-owned and private economic groups, corporations, and companies are badly affected,” the prime minister stated. “Unemployment, unpaid leave, and salary cuts are common now in the economy, so we must have stronger measures to protect the basic living standards for labourers.”

Hong Sun, vice chairman of the Korea Chamber of Business in Vietnam, told VIR that he highly appreciated the government’s fresh move, which he likened to “a lifebuoy” for struggling enterprises.

“Businesses and people are quite anxious and need critical support from the government, and while supermarket sales and business production have plummeted, they still have to pay salaries for employees,” he said. “We expect that the new fiscal package from the government will be implemented as soon as possible,” he added.

According to Sun, in April, enterprises have begun to pay taxes and insurance packages for the first quarter of 2020, and this should be delayed until enterprises perform better. He warned that if the government fails to accelerate its support, difficulties will escalate, with the appearance of massive unwanted social issues.

Currently there are over 9,000 South Korean companies operating in Vietnam, employing over 200,000 South Koreans and over one million Vietnamese labourers.

The American Chamber of Commerce in Hanoi (AmCham), also said the ongoing coronavirus outbreak is causing anxiety and uncertainty for both people and businesses in Vietnam. AmCham members are primarily concerned with ensuring the safety of employees, supply chain disruptions, and coping with the sharp drop in consumer and customer demand. “Our members express their support and appreciation for the government’s efforts to keep people safe and healthy during this crisis. Almost all members said that the government is doing an effective job responding to the crisis,” said AmCham’s executive director Adam Sitkoff.

Nguyen Anh Mau, an employee from Hanoi Knitting JSC in Hanoi which employs nearly 1,000 workers, told VIR that he has become unemployed for two months due to the pandemic, meaning his family of four will face more difficulties. “Our company has cut production by half, and along with it, workers’ salary,” he said. “Many workers have had to take unpaid leaves or were even dismissed. We need support from the government, so that our life can be stable again.”

Earlier, on March 26, the MoF submitted to the government a draft decree on extending the payment of taxes and land rental for pandemic-hit enterprises and organisations. The total value of the policy amounts to VND80.2 trillion ($3.49 billion), as opposed to the VND30 trillion ($1.4 billion) in the previous draft due to an increase in the categories of those in need of assistance.

Under the draft decree, Vietnam will push back the tax payment deadline for more sectors and add more tax categories. Payments of personal income tax and land use fees will be deferred. Over 20 sectors will benefit from the scheme, such as agriculture, car manufacturing, food services, seafood, tourism, transport, and textiles.

The sectors have all reported massive losses due to the coronavirus outbreak, which is expected to cost the tourism industry VND161 trillion ($7 billion) and the textile industry VND11 trillion ($478 million).

Last week, the Ministry of Planning and Investment (MPI) proposed new measures worth VND61.58 trillion ($2.68 billion) in order to support unprivileged people. The measures include VND35.88 trillion ($1.56 billion) from the state budget, and VND25.7 trillion ($1.11 billion) from Vietnam Bank for Social Policies (VBSP).

Specifically, the MPI suggested VND500,000 ($21) per month for people with meritorious services, in addition to the regular allowance they are entitled to. Accordingly, during April and June, these people could receive that sum, while social protection beneficiaries would get VND1 million ($43.50) a month.

The allowance was suggested at VND1.8 million ($78) per month for contract employees, part-time workers, and those on unpaid leave or with reduced income as a result of the COVID-19 pandemic’s impacts on the country.

If accepted, the government could launch the measures as proposed by the MPI, in which the cash would come from the state budget.

Additionally, businesses could borrow some money at a zero lending rate from VBSP to ensure they have enough funds to pay their affected employees. The maximum amount would not surpass 50 per cent of the regional minimum wage per employee per month to pay for staff members, who have to cease work for three months. The period of the loans is within 12 months, and businesses would have to mobilise their resources to fill the remaining 50 per cent of payment for employees.

Meanwhile, the government is being asked to give VND1 million ($43.50) between now and June to workers who have been fired and are without eligible unemployment benefits, as well as those who have no labour contract and have been left out.

VIR