Studies have found that Vietnam’s taxation system offers many incentives to foreign invested enterprises (FIEs), but puts an increasingly heavy burden on Vietnamese enterprises and people.
The 2020 annual economic report released by VEPR (the Vietnam Institute for Economic and Policy Research) on June 17 drew the public’s attention to the tax collection system.
The proportion of fees and charges to the total state budget collection and tax revenue has increased in recent years.
“Vietnam’s budget collection very much depends on indirect taxes, especially VAT. Fees and charges are burdening people. The proposals on raising taxes on consumer goods, fees and charges need thorough consideration,” the report reads.
|Studies have found that Vietnam’s taxation system offers many incentives to foreign invested enterprises (FIEs), but puts an increasingly heavy burden on Vietnamese enterprises and people.|
Pham The Anh, chief economist of VEPR, said one of the factors that most affect tax revenue in Vietnam is tax incentives, especially corporate income tax (CIT).
Many foreign companies investing in Vietnam can enjoy a preferential tax rate of 10 percent, just half of the normal tax rate. And many of them have been exploiting the policy to evade tax.
Vietnam offers too many tax incentives to FIEs, while the benefits Vietnam received from enterprises is modest.
“Some figures such as the loss of revenue because of tax incentives have not been fully calculated and made public. The analyses about the benefits and costs of tax incentives have also not been listed in detail, ” Anh commented.
Pham Chi Lan, a respected economist, believes that when integrating more deeply into the global economy, Vietnam will have more sources of tax collection. Taxation agencies need to design taxes reasonably and organize tax collection.
“What concerns me the most is the execution in tax collection. We adjust taxes, but the tax collection system has not improved. As a result, tax evasion is common in the foreign invested economic sector which should have made a great contribution to the economy,” Lan said.
“This shows Vietnam's inadequacy in tax administration and tax collection,” she said.
She also mentioned so-called ‘tax corruption’, pointing out that taxpayers and tax officers collude to appropriate big amounts of money which should have been paid to the state budget.
Together with tax evasion and tax avoidance, tax incentives offered by the government to certain groups of taxpayers are outside the standard tax system. With the incentives, taxpayers pay lower tax than the standard tax.
The Ministry of Finance (MOF), suggesting solutions to help the stock market overcome the Covid-19 crisis, has once again proposed allowing foreign-invested enterprises (FIEs) to list on the bourse.
Only 10 foreign invested enterprises (FIEs) have entered the bourse over the last decade, a very modest figure compared with the tens of thousands of enterprises now operational in Vietnam.