Taxpayers wait for completion of tax procedures at the Hanoi Tax Department. (Source: VNA) Hanoi (VNA) - Experts’ reactions to the Ministry of Finance’s (MoF) taxadjustment draft have been mixed, while the business community struggles tokeep up with the variety of proposed tax hikes.
Most recently, the MoF’sproposal to impose auxiliary property tax rate of 0.3-0.4 percent per propertyvalue for houses worth from 700 million VND (31,000 USD) and up, was thesubject of controversy.
Since 2017, the MoF hadrepeatedly proposed amendments to current tax law towards increasing the numberof tax rates.
From hikingenvironmental protection tax on petroleum to increasing value-added tax (VAT)from 10 percent to 12 percent while reducing the number of goods entitled to 5 percentVAT, or special consumption tax on soft drinks, the MoF is intent onrestructuring State budget revenue via both direct and indirect taxes.
As such, it was nosurprise that representatives from the business community and financial expertswere skeptical of the ministry’s tax plans, as evident at a quarterlyconference held by the National Economics University (NEU) last week.
Dau Anh Tuan, Directorof the Legal Department at Vietnam Chamber of Commerce and Industry (VCCI),said he himself was "dazzled" by these proposals due to theircomplexity and severity.
He said the amendmentsof VAT, special consumption tax, corporate income tax, personal income tax,natural resource tax and export-import tax, would involve 30 different kinds ofminor taxes, and they were all rising.
Nonetheless, Tuanagreed that such increases in tax rates will result in strong revenuegain, but the MoF must take into account that enterprises are also facing otherhigh costs such as increased minimum wage and gasoline prices.
Therefore, he arguedthat increasing taxes will have an immediate negative impact on businessperformance, as he believed on average costs are rising faster than revenuegrowth, and additional tax hikes would harm small and medium enterprises.
Ngo Tri Long, formerhead of Price and Market Research Institute under the MoF, said that since taxhikes are often a sensitive issue, there should be a detailed roadmap.
According to Long, sinceVAT is "regressive", meaning low-earning people have to spend alarger proportion of their income on consumption, the tax burden on essentialgoods will be higher for them than high income earners.
Phan Duc Hieu, DeputyDirector of the Central Institute for Economic Management (CIEM), also saidthat the proposed VAT increase would bring immediate gains to the State budgetbut would ultimately be a negative due to decreased purchasing power.
Phan Huu Nghi, head ofthe NEU’s Public Finance Department, said that increasing indirect taxes is acorrect trend for Vietnam, simply because they are easier to collect andcontrol.
Ta Loi, head of theNEU’s International Business, proposed replacing VAT with another tax onadditional cost to avoid tax overlap and tax fraud, which can be set at thesame level as corporate income tax on all consumable goods, and on a voluntary,independent and self-monitoring basis.
Nguyen Van Phung,Director of the Large Taxpayers Management Office under the General Departmentof Taxation, said that the MoF’s draft law proposals were simply part of along-term scheme for taxation restructuring, and that they were “withinreason”.
These tax incentives arefar from the tax system reform targets for 2011-2020 of 24 percent worth ofannual GDP, as at the moment it is only 18.1 percent.
Therefore, the MOF willand must amend a number of tax laws, though they had proved to put great pressureon the public, said Phung.
According to experts,citizens’ average income is still lower than the world’s average, sopolicymakers need to set a reasonable limit, as well as emphasising not justtax hikes but also avoiding losses from tax fraud and evasion.-VNA
VNA
