Vietnam can be a leader in tax reform: Oxfam

Vietnam has the potential to become a leader in tax reform, said Johan Langerock, tax policy expert of Oxfam at the Vietnam Fiscal Policy and Development Forum 2019, which opened in Hanoi on November 13.

Vietnam can be a leader in tax reform: Oxfam

Johan Langerock, tax policy expert of Oxfam

Upon addressing the forum themed “Towards a Fair Tax System, Langerock noted that the country’s economic growth reached a 10-year high of 7.1 per cent last year, with this strong economic momentum expected to continue for the remainder of the year.

The nation has been transformed from one of the world’s poorest countries that suffered from frequent food shortages, to a lower middle-income economy that is currently a leading exporter of rice, seafood, coffee, and other commodities.

The official poverty rate has fallen from 58 per cent in the early 1990s to less than 10 per cent today.

Despite this success, the country’s extraordinary economic track record has not been accompanied by a similar pathway in tax revenue. Most notably, compared to the size of the economy, tax revenues nationwide have been decreasing in recent years.

Langerock believes that in the long term this could pose a danger to the sustainability of the country.

He noted that decreasing tax revenues represent a concerning trend for several reasons. Mainly, it means that the tax system is failing to collect and redistribute created income and wealth in the country.

Several reports already indicate that the benefits of the nation’s economic growth are increasingly going to the wealthiest 10 per cent of the population.

According to the Oxfam representative, one of the biggest factors causing a decrease in tax revenue is the focus on lowering corporate income tax rates, along with the existence of many tax incentives that are in place for foreign investors.

This means that while revenues decrease, tax expenditures have remained high. As a result, export-led industrialization has seen significant development, at the expense of growth among agricultural and small businesses.

It is therefore inevitable that tax expenditure policies have contributed to the country’s economic growth, boosting investment in the process.

However, it must be contemplated that now is the time for the nation to rationalise tax expenditures that are placed on large companies.

Up until now, Vietnamese authorities have not been paying enough attention to performing efficient or effective analysis of tax expenditure policies. The social cost of tax expenditures remains too large to be ignored.

According to the OECD, the revenue loss stands at an estimated 1 per cent of GDP, representing a staggering amount of over VND50 trillion.

 

This amount could potentially finance 25 new 1000-bed hospitals nationwide. When tax revenue collection on large companies falls, either pressure to levy higher VAT rates on ordinary citizens increases, or fewer public services are delivered.

Langerock expressed his belief that the nation could get rid of its largest tax incentives without growth or competitiveness suffering.

According to a recent survey conducted by Grant Thornton on private equity prospect nationwide, 69 per cent of replies consider the increase in disposal income and middle-income classes as the most important factor for investing in the country.

Furthermore, 60 per cent consider high and stable economic growth, whilst only 13 per cent consider government incentives and subsidies as the most important factor.

The Oxfam representative said ASEAN countries are pushing one another into an aggressive race to the bottom in terms of corporate taxes.

Regional firms have seen their tax rates lower over the last decade. In such an environment, only large companies and wealthy shareholders win at the expense of essential public services for ordinary citizens.

He also recommended the Vietnamese authorities can proceed in two ways, noting that some tax incentives should be eliminated following an impact assessment.

In addition, as the chairman of ASEAN in 2020, Vietnam should make it a priority to raise awareness, in addition to debating the issue of tax competition and tax incentives at a regional level. Both steps should lead to an increase in tax revenue in both a fair and equitable way, according to the Oxfam representative.

He pointed out that this will lead to inequalities decreasing whilst the Government will have more resources to invest in health, education, and the fight against climate change.

At the forum, representatives from the General Department of Taxation and Vietnam Institute for Economic and Policy Research (VEPR) also delivered in-depth reports on tax expenditure in Vietnam.

They also gave some recommendations for the Government in order to use tax incentives effectively within the context of a budget deficit and high public debts. VOV

Tax collections up, but tax revenues from enterprises down

Tax collections up, but tax revenues from enterprises down

The total collection for the state budget may exceed VND46 trillion may not be good news, because the sources of revenue are uncertain and the collection from enterprises has decreased.

NA deputies okay to erase US$705 million worth of uncollectible tax liabilities

NA deputies okay to erase US$705 million worth of uncollectible tax liabilities

Tax agencies should also be held accountable for letting taxpayers delay their payments.

 
 

Other News

.
Coronavirus outbreak to cost airlines almost $30bn
Coronavirus outbreak to cost airlines almost $30bn
BUSINESSicon  21/02/2020 

Airline industry body IATA predicts global air travel demand will fall for the first time since 2009.

Crackdown on over-charging online sites
Crackdown on over-charging online sites
BUSINESSicon  21/02/2020 

More than 30,000 stores have been closed on online shopping sites including Shopee, Tiki, and Lazada due to overcharging.

Super committee faces difficulties in checking SOE property
Super committee faces difficulties in checking SOE property
BUSINESSicon  21/02/2020 

The increasing amount of property and land under State-owned enterprises (SOEs) was mentioned as a factor in their slow equitisation.

Vietnam to simplify customs checks
Vietnam to simplify customs checks
BUSINESSicon  21/02/2020 

Vietnam plans to hasten the reform of customs checks to save time and costs for businesses and facilitate trade.

Investment funds make more stock purchase despite decling prices
Investment funds make more stock purchase despite decling prices
BUSINESSicon  21/02/2020 

Although the novel coronavirus epidemic COVID-19 has been continuously slamming the stock market, sending stock prices down, many investment funds are still actively buying.

Hanoi leader pledges best conditions for Japan’s Uniqlo
Hanoi leader pledges best conditions for Japan’s Uniqlo
BUSINESSicon  21/02/2020 

Chairman of the People’s Committee of Hanoi Nguyen Duc Chung pledged to create the best possible conditions for Japan’s Uniqlo company to do business in the city, during a reception on February 20 for Uniqlo Vice President Koyama Noriaki.

VN banks still living on credit
VN banks still living on credit
BUSINESSicon  21/02/2020 

Most banks made fat profits in 2019 and some of them had profit of over tens of trillion of dong. But their profits mostly came from lending.

Foreign brands shake up Vietnamese fashion market
Foreign brands shake up Vietnamese fashion market
BUSINESSicon  24/02/2020 

Vietnamese fashion brands are feeling the heat as more and more foreign brands have arrived.

Qantas warns coronavirus impact could hit $99m
Qantas warns coronavirus impact could hit $99m
BUSINESSicon  20/02/2020 

The warning comes as concerns grow over the impact of the outbreak on airlines and the global economy.

VN Industry Ministry no longer keen on bidding mechanism for solar power price
VN Industry Ministry no longer keen on bidding mechanism for solar power price
BUSINESSicon  20/02/2020 

The Ministry of Industry and Trade (MoIT) has had a change of heart on the bidding mechanism for solar power tariffs in Vietnam.

Vietnam braces for economic effects of COVID-19
Vietnam braces for economic effects of COVID-19
BUSINESSicon  20/02/2020 

Vietnam will optimise external resources to spur national economy as the impact of the outbreak of coronavirus on foreign investment flows into the country is visible, according to the Ministry of Planning and Investment (MPI).

The sun still shines in Vietnam: World Bank
The sun still shines in Vietnam: World Bank
FEATUREicon  19/02/2020 

Saying that ‘the sun is still shining above the Vietnamese sky’, the World Bank has also noted that the country should not ignore risks that could occur during bad times.

Some service businesses are thriving amid Covid-19 crisis
Some service businesses are thriving amid Covid-19 crisis
BUSINESSicon  20/02/2020 

While many industries have suffered from Covid-19 epidemic, taxi drivers and shippers are earning more money.

VN catfish sellers try to conquer home market
VN catfish sellers try to conquer home market
BUSINESSicon  21/02/2020 

Seafood companies have vowed to bring catfish to Vietnamese dining tables after their success in the world market.

Farm produce stuck at border, but farmers don't want to sell
Farm produce stuck at border, but farmers don't want to sell
BUSINESSicon  20/02/2020 

Thousands of trucks are still heading for the Vietnam-China border gates, though the exports are getting stuck because of the Covid-19 epidemic.

How much is needed to be listed among the top stock billionaires in Vietnam?
How much is needed to be listed among the top stock billionaires in Vietnam?
BUSINESSicon  22/02/2020 

In 2009, when the VN Index soared from 324 points to the year's peak of 630 points, the richest stock billionaire had total assets worth over VND9 trillion. 

Mekong Delta considers VND67-trillion expy projects
Mekong Delta considers VND67-trillion expy projects
BUSINESSicon  20/02/2020 

The Mekong Delta is expected to introduce two more major expressways, whose total investment exceeds VND67.4 trillion, in the years to come to bolster the region’s socioeconomic growth, according to the Ministry of Transport.

Govt’s new decree removes barriers to automobile imports
Govt’s new decree removes barriers to automobile imports
BUSINESSicon  19/02/2020 

Automobile importers in Vietnam will no longer have to obtain a Vehicle Type Approval (VTA) certificate from authorities in exporting countries, making it easier for them to import cars into the country.

VN investment inflow below expectations after CPTPP
VN investment inflow below expectations after CPTPP
BUSINESSicon  19/02/2020 

A year since the CPTPP came into force, trade between Viet Nam and other members of the trade deal had posted significant gains, but the potential to expand remained large, according to the Ministry of Industry and Trade.

VN central bank makes net cash withdrawal amidst high inflation pressure
VN central bank makes net cash withdrawal amidst high inflation pressure
BUSINESSicon  19/02/2020 

The State Bank of Vietnam made a net cash withdrawal worth VND86 trillion out of the economy through open market operations (OMO) from January 20 to February 14.

 
 
 
Leave your comment on an article

OR QUICK LOGIN