VietNamNet Bridge - The Ministry of Finance’s (MOF) recent proposals on raising many kinds of taxes and fees have been facing strong opposition from the public.

Prime Minister Nguyen Xuan Phuc at the GMS6 Business Summit in late March 2013 said the government is going to cut the corporate income tax (CIT) from 20-22 percent to 15-17 percent.

Analysts think the 15-17 percent CIT would be applied to micro and small-and medium-sized enterprises, respectively, as proposed by MOF. 

The ministry suggested a tax reduction only once recently, but it has frequently proposed to raise tax. 

In August 2017, MOF stirred up the public when proposing to raise the VAT (value added tax) from 10 percent to 12 percent and cut the number of products subject to the preferential VAT rate of 5 percent, because the 10 percent tax rate ‘isn’t in line with international practice’ and ‘cannot ensure the nation’s financial security’.

In August 2017, MOF stirred up the public when proposing to raise the VAT (value added tax) from 10 percent to 12 percent and cut the number of products subject to the preferential VAT rate of 5 percent, because the 10 percent tax rate ‘isn’t in line with international practice’ and ‘cannot ensure the nation’s financial security’.

Also in 2017, the ministry insisted on raising the environmental protection tax to VND4,000 on every liter of petrol sold, saying taxes from crude oil are decreasing and the petrol price in Vietnam is low compared with 122 countries.

In early 2018, MOF proposed raising the personal income tax rate (PIT) to ‘help increase the state budget revenue’. 

Most recently, in mid-April, MOF mentioned a plan to tax houses with the value of over VND700 million and tax cars worth over VND1.5 billion.

Explaining the taxing of individuals’ assets, the ministry said that this kind of tax exists in many countries. According to OECD (The Organisation for Economic Co-operation and Development), the tax brings 4 percent of revenue in Canada, 3 percent in the US, and 0.6 percent in developed countries.

However, Vietnam’s annual income per capita is very modest, just around $2,000.

“Raising the tax on workers with low living standards may turn the near-poor into the poor, and turn low-income earners into near-poor,” said Bui Duc Thu, a National Assembly deputy.

The real reason behind MOF’s decision to propose a tax hike is to increase the source of revenue for the state budget. However, as Ngo Tri Long, a renowned economist, said, the high public debt and prolonged budget deficit must not be blamed on low tax collections but on embezzlement, inappropriate investments, and loose financial discipline.

“If the problems aren’t settled, the budget deficit will still occur even if MOF raises taxes many times,” he said.

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