Tax implications of cross-border trade

Lower corporate income tax sought to stimulate SME development

Workers from the Nhu Thanh Forest Product Processing Company in Thanh Hoa Province work on timber. The Ministry of Finance has proposed to reduce the corporate income tax for enterprises from 20 per cent to 15-17 per cent. VNA/VNS Photo Vu Sinh

How do you respond to the Ministry of Finance’s proposal to reduce the corporate income tax for enterprises from 20 per cent to 15-17 per cent?

This is good news for small and micro enterprises. This is the real spirit of the Law on Supporting Small and Medium Enterprises.

More recently in the draft revised tax laws, including that of Value Added Tax, Enterprises Income Tax, Individual Income Tax, Special Consumption Tax, Natural Resources Tax and the Law on Import and Export Tax, all proposals on the reduction of corporate income tax were turned down. That’s why the decision to separate the tax priority given to small and micro enterprises from the regular tax law as a Resolution of the National Assembly is the right decision of the Government and the Ministry of Finance.

Some say the reduction is too little. How do you respond to that?

According to the latest report from the General Department of Taxation, around 50% of small and micro enterprises having gained revenue has to pay income tax.

However, all small and micro enterprises have to pay all types of administrative fees, including accounting tax and others. That’s why if they have to pay from 3 to 5 per cent of tax on their revenue, it will be a good decision for small and super small enterprises. In other words, the decision will help reduce the financial burden for small and micro enterprises.

Do you think the decision will encourage more business households to become small enterprises?

The switch from household businesses into small or micro enterprises is an important policy of the Government. However, in the last two years, the process has been very slow – only a small number of household businesses have turned into enterprises. Hopefully, the decision made by the Government and the Ministry of Finance will push many business households to change to either small or micro enterprises.

I have also highly appreciated the Ministry of Finance’s issuance of Circular 132/2018/TT-BTC on a special accounting system for household business. The Circular has helped push many household businesses to become enterprises.

However, I’m not optimistic about the idea that tax reduction is a real push to making household business become enterprises. Why? Because our administrative procedures for an enterprise are much more complicated than for a household business.

Vietnam has set a target that by 2020, the country will have 1 million enterprises. Do you think that target is realistic?

According to statistics released by the Ministry of Planning and Investment, by late 2018, Vietnam had 715,000 enterprises. And the number of new enterprises established in the last few years was 130,000 enterprises per year. That’s why the target of one million enterprises by 2020 is a challenge for us.

In the last few years, the Ministry of Finance, has done a very good job in reforming their administrative procedures and cutting down expenditure for enterprises. Policies adopted by the Ministry of Finance have left positive impacts on the enterprise community. I hope that lessons learned from the Ministry of Finance will help Vietnam quickly achieve its objectives in the course of tax reform.

The Ministry of Finance has made a proposal to cut down enterprise income tax from 20 per cent at present to 15-17 per cent. The 15 per cent is applied to enterprises with annual revenue of less than VND 3 billion and fewer than 10 employees participating in the social insurance fund. The 17 per cent tax is applied to any enterprises with a total annual revenue from VND 3-50 billion and fewer than 100 employees participating in the social insurance fund.

VNS