VietNamNet Bridge – Small and medium enterprises (SMEs) last week received good news that they can enjoy the 30 percent corporate income tax (CIT) in 2011. However, some businesses said the tax reduction does not have much significance to them, because they take loss and they do not have to pay tax.

Late last week, a government decree stipulating the tax measures to help ease difficulties of individuals and businesses was issued, under which small and medium enterprises, which use many laborers, will enjoy the 30 percent CIT reduction in 2011.

However, businesses seem to keep indifferent to the good news, saying that the solution is not powerful enough to help them overcome difficulties.

Vu Dinh Long, Director of Dai Duong Xanh Company in Thanh Xuan district in Hanoi, said that small enterprises like his, only have modest annual profits, just hundreds of millions of dong. Long said that he only has to pay less than 100 million dong in CIT every year (25 percent), and with the CIT 30 percent tax reduction, he would save just tens of millions of dong, which makes nothing if compared with the current difficulties.

Some economists have agreed that the solution is not strong enough to help businesses overcome difficulties. Dr Nguyen Nam, Deputy Head of the Business Research and Development Institute under the Hanoi Business Association, 976 percent of registered businesses are small and medium enterprises. The high inflation rate over the last year has made a lot of businesses exhausted. It is estimated that up to 50 percent of small and medium enterprises are facing big difficulties.

A lot of businesses have anticipated that they would not make profit in 2011; others have foreseen losses or low profits. As such, the 30 percent CIT reduction would not have much significance. Unprofitable businesses would not get any benefits from the decision, because they do not have to pay tax.

Businesses have said that they expect stronger and more effective measures, such as the exemption or reductions of leasing fees for workshop premises.

Vu Ngoc Binh, General Director of Phuong Lan Company at No 23 Nguyen Cong Tru street in Hanoi, said that he had to pay 36 million dong for every hectare of land leased at the Lien Phuong Industrial Zone in Hanoi in 2010. Meanwhile, the fee soared to 464 million dong in 2011.

“We wish to see the workshop premises leasing fee lowered. This will help us reduce the production costs, make the sale prices of finished products cheaper and more competitive,” Binh said.

Vu Quoc Tuan, Chair of the Vietnam Craft Village Association, said that Vietnam’s national economy has been staying safe from the global economic crisis because it has five million business households, craft villages and small enterprises – the businesses with flexible apparatuses which allow to easily adapt to the changes in the national economy.

Meanwhile, Tuan said, small enterprises cannot enjoy any preferences from the State. Now they still have to pay high for workshop premises, about 2-3 times higher than that paid by foreign invested enterprises and state owned enterprises.

Tuan stressed that in the current conditions, exempting or reducing the land leasing fee for small enterprises would be a useful measure.

According to Dr Nguyen Nam, inflation shows the imbalance between money and goods (profuse money, few goods). Therefore, it is not only necessary to apply monetary policies (raising the interest rates), but also to push up the volume of goods in circulation.

However, it is not easy to push up the volume of goods in circulation at this moment, because high interest rates would make businesses unable to access the bank loans. In order to help maintain production, it is necessary to support businesses. The measures could be providing preferential credit, cutting tax and other financial solutions.

Tran Thuy