The National Financial Supervisory Committee has proposed cuts to corporate income tax for small-and-medium sized enterprises to promote their development. (Source: VNA)

Hanoi (VNS/VNA) - Corporate income tax levied on small and medium–sized enterprises (SMEs) should be reduced to promote the business development, a solution together with broadening tax base to increase budget revenue from business and production.

This was a highlighted in the January-September fiscal and budget report by the National Financial Supervisory Committee (NFSC) published last week which said that the tax cut would help restructure budget revenue in a sustainable direction.

The NFSC said that Vietnam ran the lowest budget deficit in three years as of September 30 at 26.7 trillion VND (1.16 billion USD), compared to 61.5 trillion VND (2.63 billion USD) during the same period in 2017 and 152.2 billion VND (6.51 billion USD) in 2016.

However, budget collection lacked sustainability, the NFSC said.

The committee pointed out in the report that budget collection was still largely dependent on unsustainable sources such as crude oil. In the short term, budget collection from crude oil was affected by fluctuations of global prices and output while in the long term, budget collection from crude oil also lacked sustainability due to limited reserves.

In addition, increases in domestic budget collection mainly came from taxes on land and houses while collection from businesses was much lower than estimated.

The report cited statistics that said as of the end of September, collection from land and houses had reached 104.4 percent of estimate but only 65.3 percent from SOEs, 58.8 percent from the foreign direct investment (FDI) sector and 68.7 percent from the private sector.

Budget collection in many provinces and cities remained heavily dependent on sales of public assets, especially land use rights.

The NFSC’s report also pointed out that disbursement of investment in capital construction was lower than estimated at only 50.2 percent.

Another report by the State Audit of Vietnam showed that budget collection was estimated to total nearly VNĐ1.36 quadrillion for the full year, 3 percent higher than expected and 5.5 percent higher than in 2017.

The State Audit of Vietnam, however, said in the report that the excess amounts mainly came from land, houses and crude oil. Collection from land and houses increased by 35.9 percent and from crude oil by 53.2 percent.

Collection from the SOE, FDI and private sectors all saw declines of 2.9 percent, 15.1 percent and 2.2 percent.

According to the NFSC, it was necessary to strengthen measures to support businesses to boost their development to increase budget revenue from business and production and reduce reliance on unstable sources.

The committee said that lowering corporate income tax for SMEs could be a solution, together with broadening the tax base.

In addition, the NFSC said that the equitisation and capital divestment at SOEs must be accelerated to increase their efficiency.

At the Greater Mekong Subregion Business Summit, Prime Minister Nguyen Xuan Phuc said that the Vietnamese Government intended to cut corporate income tax from the current 20-22 percent to 15-17 percent to create an attractive investment environment for Vietnam.

In August 2017, the Ministry of Finance also proposed a tax rate of 15 percent on micro-businesses (those with an annual revenue of less than 3 billion VND) and 17 percent for SMEs (those with less than 200 employees and annual revenue from 3 billion VND to 50 billion VND).

According to To Hoai Nam, Deputy Chairman of the Vietnam Association of SMEs, the tax cuts for businesses were good but not enough. In the long term, policies should focus on improving the competitiveness of enterprises and their operational efficiency. He said that tax policies must be transparent.

According to the General Department of Taxation, it was necessary to review tax policies comprehensively to increase the sustainability of budget revenue in terms of scale and structure.

Policies would be reviewed on the basis that the tax base would be expanded, the tax authority said.

For SMEs, reasonable tax rates would be proposed to increase competitiveness but ensure compliance with the Law on Supporting SMEs.-VNS/VNA