Hanoi (VNA) -
"In order to encourage business households to become enterprises, it is important to have a favourable, trustworthy and attractive environment."

More incentives, households will become enterprises by themselves

Lawyer Truong Thanh Duc said so when talking about solutions to encourage households to become enterprises.

"We need to create a favourable environment and remove obstacles so that households are no longer worried about transforming into enterprises," Duc said.

Economist Nguyen Thanh Binh highlighted the need to raise households’ awareness of the benefits and work out incentives for them.

Truong Thanh Duc's facility on Hang Bong Street prints over 300 shirts a day. (Photo: VietnamPlus)

"For example, households could be allowed to employ few workers, only 3-5 workers will pay insurance or tax, to avoid costly expenses," Binh said.

For his part, Economist Le Duy Binh said the No. 1 principle in the process is to ensure that the burden of compliance costs, legal affairs and taxation for individual and single-owner enterprises will not be much higher or even equal to those incurred by business households at present.

He proposed reviewing and fine-tuning legal documents to ensure that the cost of compliance is in line with the law and the cost of tax compliance and payment is at a low level.

Creating a level playing field

An important point, according to Binh, is how to ensure the attractiveness of the form of private enterprises (sole proprietorship / single-owner enterprises).

He suggested that individual/single-owner enterprises should be subject to the same flat tax rate as applied for business households at present.

During the transition period, tax regulations will be adjusted so that tax amount will not be too high.

Citing experience from other countries, Binh said the owners of individual businesses and single-owner businesses could comply with tax regulations under the personal income tax law. They could file annual tax declaration form as individuals.

Micro-sized enterprises need pro-business environment hinh anh 1Visitors at Vietnam silk exhibition. (Photo: VietnamPlus)

Such could greatly reduce regulations on financial and tax reporting, and reporting frequency.

Meanwhile, a representative from the General Department of Taxation said that in principle, it is not allowed to force households to become enterprises.

He added that authorities are building more policies to facilitate the process, including classifying households into large and small groups.

For the large group, the applicable policy may be similar to that for enterprises, ensuring that "they are treated the same".

Economist Cao Si Kiem agreed with this approach, saying that the starting points of households are different, some could become enterprises right away but others not.

"In order to come into realities, the policy should be specified to closely target each object," he said.

Vietnam has considered adding regulations of household business to the revised Law on Enterprises that is set to be submitted to the National Assembly for approval in October.

Vice Chairman of the National Assembly’s Economic Committee Nguyen Ngoc Bao said the country has an estimated more than 5.1 million of household businesses.

They employ around 8 million workhands nationwide and contribute nearly 30 percent of the country’s Gross Domestic Product (GDP). However, it only makes up 1.6 percent of the State budget, he added.

The revised Enterprise Law is to have 10 chapters and 213 articles, of which 60 articles are under revised and one chapter and eight articles added.

The aim is to continue making a business cheaper and safer business tool for investors, thereby increasing the attraction and mobilisation of all sources for production and doing business.

It also aims to facilitate activities of business establishment, cut down cost and time in starting a business, improve mechanisms to effectively protect the legitimate rights and interests of investors, shareholders and members of enterprises as well as make corporate governance meeting regional and international standards./.