Goal of 1 million businesses still far away

The plan to develop household businesses into normal businesses has not succeeded. The goal of having 1 million businesses in the country by the end of 2020 will not be met.

Resolution 35 released on May 16, 2016 set a goal of having 1 million businesses by 2020, which included large-scale powerful corporations. To date, there have been 795,000 businesses.

Goal of 1 million businesses still far away

One of the reasons behind the failure of the goal, as pointed out by economists, is that the idea of turning household businesses into companies could not be realized.

In 2015, when Vietnam was figuring out the plan to have 1 million businesses, it had 443,000 operational businesses. So, in order to have 1 million businesses by the end of 2020, the number of businesses needed to increase by 17.7 percent per annum. This was a highly ambitious plan.

At that time, Vietnam had 3.5 million household businesses, including a high number of large-scale business households which operated like companies. Therefore, agencies hoped that the households would grow and supplement the business community.

However, the calculation has not occurred because the majority of household businesses don’t want to become enterprises.

In Hanoi, the local authorities in 2019 granted business registration certificates to 27,000 new businesses, an increase of 8 percent compared with 2018. However, the number only included 48 businesses that were transformed from household businesses.

The plan to develop household businesses into normal businesses has not succeeded. The goal of having 1 million businesses in the country by the end of 2020 will not be met.

Meanwhile, a report found that Hanoi had up to 300,000 household businesses and most of them did not want to become enterprises.
.
A survey conducted in 2018 by the Central Institute of Economic Management (CIEM) on 400 large household businesses with the same operation scale as small enterprises throughout the country found that only 8.7 percent of households with capital of VND1-5 billion had thought of shifting into companies.

Only 5.6 percent of household businesses with over 10 workers wanted to become enterprises.

Lawyer Truong Thanh Duc from Basico Law Firm said that the Enterprise Law is ‘fully open’ and investors still can set up businesses and become directors even if they don’t have houses, land, capital or qualifications. However, even household businesses with annual revenue of tens of billion dong don’t want to be ‘upgraded’ into companies.

This is because household businesses only have to pay presumptive tax and keep simple accounting books, Duc said.

Meanwhile, enterprises have to pay corporate income tax, have salary fund and take insurance policies for workers. And they must have transparent accounts.

Because of simple conditions, household businesses have been increasing with 5 million households established.

 

Expectation fails

Pham Chi Lan, a respected economist, said many households are reluctant to shift to enterprises because they don’t want to change their accounting system. In order to satisfy the requirements on accounting books, they have to hire more workers and build corporate governance, which will lead to higher business costs.

However, Lan believes there is a bigger reason behind the decision on not becoming enterprises. Once operational as enterprises, they will be more regularly inspected by agencies, which will put pressure on them.

“In many cases, households that make their business registration one day have to receive agency inspectors the next day,” she said.

As a result, the goal of developing businesses is unattainable, while the private sector, which makes up 32 percent of GDP, operates on a small scale and has low competitiveness.

According to Hanoi Taxation Agency, the operation of household businesses in the capital city is unplanned without coordination. It is difficult to find permanent business locations, which causes difficulties for tax administration.

In many cases, business households issue invoices illegally, which affects the business environment and causes losses to state budget revenue. Many households have very high revenue, especially online business households, but they change addresses often, which makes it difficult for taxation bodies to force them to fulfill tax obligations.

Duc of Basico said that business households understand that if they become enterprises they will enjoy preferences in taxes, loans and worker employment. But they still don’t want to change.

In some localities, many households unwillingly register the establishment of companies after they are persuaded by local authorities, but they later set up new household businesses, and the companies just exist as a formality.

Duc said that only when there are reasonable policies will household businesses be encouraged to shift to enterprises. This will not only help increase the number of enterprises but also create transparency and fairness in production and business. 

Tran Thuy

Taxation body missing out on taxes from sharing-economy businesses

Taxation body missing out on taxes from sharing-economy businesses

Businesses following the sharing economy model are facing problems in tax declaration. Because of the lack of regulations, the taxation body may be taxing inaccurately or missing taxpayers.

Vietnamese businesses told to export to US through Amazon during pandemic

Vietnamese businesses told to export to US through Amazon during pandemic

Vietnamese exporters should boost exports to the US through the Amazon e-commerce platform during the COVID-19 pandemic, speakers told a seminar in HCM City yesterday. 

 
 

Other News

.
MIC outlines plan on preparing human resources for national digital transformation
MIC outlines plan on preparing human resources for national digital transformation
FEATUREicon  30/01/2021 

The Ministry of Information and Communications (MIC) is building a plan to develop digital human resources for national digital transformation.

Digital transformation opens up new development space
Digital transformation opens up new development space
FEATUREicon  29/01/2021 

"Like exploring new lands, the expanded cyberspace will open up a new development space for the country,” Minister of Information and Communications Nguyen Manh Hung said at the 13th National Party Congress on Thursday morning (January 28).

Vietnamese-made games now played around the world
Vietnamese-made games now played around the world
FEATUREicon  31/01/2021 

To create a level playing field and help Vietnamese develop games reach the world market, it is necessary to have more reasonable policies, experts say.

Education Minister outlines 9 achievements, 5 problems in educational sector
Education Minister outlines 9 achievements, 5 problems in educational sector
FEATUREicon  28/01/2021 

After seven years of implementing Resolution 29 on reforming the education and training sector, Vietnam has gained several outstanding achievements.

Vietnam stands at turning point to recover and make a breakthrough
Vietnam stands at turning point to recover and make a breakthrough
FEATUREicon  29/01/2021 

The 13th National Party Congress is taking place in the context of unpredictable changes in the world, as the Covid-19 pandemic is dividing many countries, the global economy is experiencing negative growth and ongoing trade and economic conflicts.

13th National Party Congress: Hanoi, HCM City aim for digital government
13th National Party Congress: Hanoi, HCM City aim for digital government
FEATUREicon  28/01/2021 

Hanoi and Ho Chi Minh City both plan to develop synchronous, inter-connected digital, IT, and data infrastructure, creating a foundation for digital economic and social development.

UNESCO expert: Vietnam education reform on right path, recommends better allocation of funds
UNESCO expert: Vietnam education reform on right path, recommends better allocation of funds
FEATUREicon  28/01/2021 

Dominique Altner, Senior Program Specialist at IIEP (International Institute for Educational Planning), spoke to VietnamNet about the development of Vietnam’s education system in the last five years.

Two resolutions for reform
Two resolutions for reform
FEATUREicon  28/01/2021 

The Government has issued Resolutions 01 and 02, showing the spirit of reform and steadfast effort over the years to remove barriers in the business environment, helping people and businesses to thrive.

Digital transformation to contribute 25% of HCM City's GRDP by 2025
Digital transformation to contribute 25% of HCM City's GRDP by 2025
FEATUREicon  27/01/2021 

By 2025, digital transformation will contribute 25% of HCM City's gross regional domestic product (GRDP), said Chairman of HCM City People's Committee Nguyen Thanh Phong.

Wind, solar power sees new boom
Wind, solar power sees new boom
FEATUREicon  27/01/2021 

Many wind and solar power projects are awaiting approval to be added to the list of projects to be developed under the national power development plan.

After 30-year boom, motorbike market sees decline in sales
After 30-year boom, motorbike market sees decline in sales
FEATUREicon  31/01/2021 

The sales of motorbikes decreased sharply in 2020. After 30 years of continued growth, the motorbike market has become saturated.

Vietnam shows its 'firm stuff' after five years of difficulties
Vietnam shows its 'firm stuff' after five years of difficulties
FEATUREicon  26/01/2021 

The US-China trade war, Brexit, the US withdrawal from TPP, Covid-19 and internal difficulties all have affected Vietnam’s economy in the last five years.

Long-term development commitments realised through strategic M&A moves
Long-term development commitments realised through strategic M&A moves
FEATUREicon  25/01/2021 

A potential rise in mergers and acquisitions is sparking concerns that local firms will lose competitiveness by selling themselves to foreign investors.

Reshuffle underway to further stimulate revival of economy
Reshuffle underway to further stimulate revival of economy
FEATUREicon  23/01/2021 

The 13th National Party Congress is expected to set the country’s average annual growth rate of 6.5-7 per cent from now until 2025, when Vietnam may become a higher middle-income nation. 

Tech giants building on ICT potential
Tech giants building on ICT potential
FEATUREicon  23/01/2021 

Vietnam’s ICT market is expected to see a big 5G race in 2021 as international tech giants look to boost partnerships with local telcos to gain more advantages, driven by strong performances in Vietnam in 2020.

American corporations relocate to Vietnam as costs rise in other locations
American corporations relocate to Vietnam as costs rise in other locations
FEATUREicon  26/01/2021 

Vietnam has recently received many large global groups, led by US technology firms, that have brought production chains with capital of up to billions of dollars.

Real estate bond interest rates are too high, say experts
Real estate bond interest rates are too high, say experts
FEATUREicon  25/01/2021 

The HCM City Real Estate Association (HOREA), in its report about the real estate market in 2020 and prospects in 2021, says the real estate bond market will continue to grow well this year.

Vietnamese engineer works on vaccine patch, high-tech face mask
Vietnamese engineer works on vaccine patch, high-tech face mask
FEATUREicon  23/01/2021 

After inventing a biological mask with outstanding features, Dr Nguyen Duc Thanh, winner of many prestigious awards, and his co-workers are working on vaccine patches.

Flower villages still waiting for Tet buyers
Flower villages still waiting for Tet buyers
FEATUREicon  22/01/2021 

Farmers in flower villages in HCM City are worried as merchants have not contacted them yet for Tet sale season.

Ministry of Natural Resources and Environment announces top 10 events
Ministry of Natural Resources and Environment announces top 10 events
FEATUREicon  21/01/2021 

Minister of Natural Resources and Environment Tran Hong Ha has signed a decision announcing the top 10 events of the sector last year. Below are the selected events.

 
 
 
Leave your comment on an article

OR QUICK LOGIN