VietnamCredit
VietnamCredit About Us Cafe€redit Contact Us
Login Register
0
USD
GO TO CART
Check out

VND 50.000 billion tax loss due to tax incentives

Friday 15, 11 2019
According to Oxfam's calculations, because of the long-lasting tax incentives, Vietnam has suffered losses of VND 50,000 billion of tax a year, which is enough to build 25 hospitals with 1,000 beds.
VND 50.000 billion tax loss due to tax incentives

Eliminate tax incentives

That Vietnam should eliminate tax incentives was recommended by Johan Langerock - Oxfam's tax policy expert - at Vietnam Finance and Development Policy Forum 2019 held on the morning of November 13.
 
Oxfam is a non-governmental organization operating in the areas of rural development, risk reduction, climate change and disaster response, civil society and ethnic minority community development. This expert cited OECD data showing that tax incentives for businesses in Vietnam are equivalent to a loss of 1% of GDP. This corresponds to a loss of about VND 50,000 billion per year, which he thought is enough to build 25 new 1,000-bed hospitals.

"As tax revenues from large companies decline, the pressure to pay the VAT of people will increase or budgets for public services like health and education will be cut. Oxfam believes that Vietnam can eliminate tax incentives without compromising national growth or competitiveness” the expert said.
 
Tax incentives such as corporate tax reductions, import duty exemptions, value-added tax (VAT) reductions, and personal income tax exemptions have been conducted by Vietnam and many other countries as a way to attract foreign investment. According to Mr. Johan Langerock, this is not only a problem at the national level, but there is a fierce race of tax incentives for businesses in ASEAN.

"Companies operating in ASEAN have been paying lower and lower tax rates over the past decade. In such a business environment, large companies with wealthy shareholders are getting more and more benefits, while the essential public services for ordinary people have not been properly invested and developed" said Oxfam's expert.

In addition to eliminating some tax incentives, Oxfam also suggested that Vietnam should add the issue of tax competition and tax incentives to ASEAN's agenda to raise awareness and initiate regional level discussions.

Feasibility

Raising views on these issues, Mr. Nguyen Van Phung, Director of the Department of Business Tax Administration (General Department of Taxation), said that the tax incentives for the last 10 years have dropped sharply, and the adjustments are based on previous tax incentives reviews. In addition, Mr. Nguyen Duc Thanh, Director of the Institute of Economic and Policy Research, posed a question: "If there had not been these incentives 10-20 years ago, would any businesses have invested in Vietnam? And if they had not poured capital into Vietnam, could current economic targets be achieved?".

Therefore, Mr. Thanh said that the issue of tax incentives has two sides. On the one hand, it may reduce the budget revenue. On the other hand, however, it attracts investors. Without foreign investors, it will be difficult for Vietnam to reach its growth targets and reduce unemployment. As a result, we must accept this opportunity cost.

In order to increase budget revenues, besides solutions on spending and tax administration, Mr. Ho Ngoc Tu, Public Policy Department, Institute of Strategy and Financial Policy, Ministry of Finance mentioned property tax. The tax has not yet been applied, he said, resulting in a part of potential revenue being overlooked as high-income earners who have many assets have not yet been taxed.

"The application of property tax is absolutely right. It will increase revenue for the state budget and ensure fairness in tax administration. This is a progressive tax, which means the more properties as real estate one has, the more tax they will have to pay" the expert said.
Source: Vietnambiz

You may also like

Should you be too pessimistic about the economic impact of Covid-19?
Friday 27, 03 2020

Should you be too pessimistic about the economic impact of Covid-19?

The risk of having a global economic depression currently has been fully...
Vietnam's economic growth to reach below 6% in 2020
Friday 27, 03 2020

Vietnam's economic growth to reach below 6% in 2020

Standard Chartered also lowered its growth forecast for Vietnam by 0.4...
+84 37 99 44 511