Businesses seek tax reduction to foster recovery after pandemic
The COVID-19 pandemic is a huge challenge for businesses irrespective of sector and size in all regions and countries, including Vietnam.
|Many businesses and business groups have urged the Government to reduce VAT, currently levied at 10 per cent, by half to help them reduce prices, enabling them to make a quick recovery after the outbreak ends. — Photo baoquocte.vn|
To ride it out and recover once the pandemic is controlled, Vietnamese businesses are seeking support from the Government, including tax breaks like value-added tax (VAT) reduction.
Many businesses and business groups have urged the Government to reduce VAT, currently levied at 10 per cent, by half to help them reduce prices, enabling them to make a quick recovery after the outbreak ends.
Tran Thi Kim Nhung, director of Kim Dong Thuan Company, a producer of agro-products, said the Government has extended the deadline for tax payment for many firms, admittedly a decision of great significance in the current situation.
But most enterprises like hers really want the Government to reduce VAT, possibly by 50 per cent.
The CEO of a cement company in HCM City concurred with her, saying the pre-tax price of cement now is around VND80,000 per bag, but goes up to VND88,000 due to the 10 per cent VAT rate.
A 50 per cent VAT cut would reduce the price to VND84,000, making it more attractive to buyers, many of whom are also facing difficulties now, he said.
Many cement enterprises said a VAT reduction would help them liquidate some of their inventories, which are estimated to be 2.35 times higher than at the same time last year after sales declined by nearly five million tonnes in the first quarter.
In HCM City, the tourism sector has taken a tremendous hit with 90 per cent of travel firms suspending operations.
An estimated 20,000 workers, or 70 per cent of the industry’s workforce, are off work without pay and likely to remain so until the disease is contained.
Revenues started falling in February, and in March they plummeted by 71 per cent year-on-year to VND2.2 trillion (US$94.83 million).
The city Department of Tourism has also called for tax breaks and delayed payment to support the industry.
Many business groups have also suggested a VAT reduction to 5 per cent from the current 10 per cent.
The Ministry of Construction has written to Prime Minister Nguyen Xuan Phuc suggesting several measures to support the construction materials industry, one of which is to reduce VAT to 5 per cent.
Analysts said Vietnam’s VAT rate is rather high compared to that of other countries and territories in the region.
For instance, it is 5 per cent in Taiwan, 6 per cent in Malaysia and 7 per cent in Singapore and Thailand.
But some policymakers questioned the need for such a cut.
They said that many goods and services that are deemed essential to production and public consumption are either not taxed or imposed a VAT of only 5 per cent.
They were referring to the fact that the VAT rate is 5 per cent on certain foodstuffs and waived for many goods and services.
For instance, the rate for overseas construction, exports and associated services, agricultural equipment, fertilisers, and animal feed is zero.
Basic foodstuffs, transport services, medical equipment, and agricultural production and services only have a 5 per cent tax.
Aid package demanded for tourism industry
The COVID-19 pandemic has taken a heavy toll on Vietnam’s tourism sector, which saw growth rate fall to nearly zero per cent in April.
According to data from the General Statistics Office, there were only 26,200 international visitors in April, down 84.2 per cent month-on-month and 98.2 per cent year-on-year as the country closed its borders, suspended international flights and almost stopped issuing visas since mid-March.
According to figures from the Ministry of Planning and Investment, over 90 per cent of travel companies around the country and many hotels and restaurants have closed down.
The tourism sector saw revenues fall by around VND17.3 trillion ($752.17 million) in the first quarter, or over 30 per cent.
The hotel and food industries are estimated to have seen a VND3.8 trillion ($165.21 million) fall in revenues and travel services, a fall of VND3.5 trillion ($152.17 million).
The number of unemployed people in the tourism industry has been soaring.
Faced with this desperate situation, the Vietnam Tourism Advisory Board (TAB) has called for a Government-guaranteed credit package of VND150 trillion ($6.52 billion) to support travel companies worst hit by the pandemic.
The amount is equivalent to 25 per cent of the tourism sector’s revenues last year.
According to the TAB, each firm should be allowed to borrow an amount equivalent to the value-added tax, corporate income tax and payroll tax it paid last year.
The loan should be disbursed over a quarter, starting this month, and the borrower should be allowed to repay it in two phases, it said.
Land to be auctioned in HCM City’s Thu Thiem New Urban Area
HCM City will soon auction three land lots and 14 apartment blocks in the Thu Thiem New Urban Area in District 2.
Under a plan approved by the administration, property companies need to fulfill certain conditions to be eligible to participate in the auction. They include making a deposit equivalent to 20 per cent of the reserve prices of the properties by bank transfer. Bank guarantees will not be accepted.
Participants also need to be active in the property business and use the land sites in accordance with the city’s urban planning and their designated purposes.
The three land plots, R1, R2 and R3, measure a total of 45,971.4 square metres and will house 2,220 apartments.
The city’s Land Fund Development Centre has been tasked with organising the auction. VNS
The Ministry of Finance has slashed administration fees in numerous sectors to help the economy get back on its feet when the COVID-19 pandemic eases.
The Ministry of Planning and Investment has asked for corporate income tax (CIT) to be cut for small and medium-sized enterprises (SMEs) by half this year in an effort to boost growth when the COVID-19 pandemic eases.