While most enterprises are struggling to earn some profit and fulfill tax obligations due to protracted economic woes, some firms may just choose to get away with huge unpaid tax sums. The tax agency under the Ministry of Finance should have tracked them down to force them to observe tax regulations.

But the ministry has chosen a far less bumpy path by attempting to approval to erase enormous tax arrears and fines for tax payment delays. Thus, a total of VND10 trillion in unpaid taxes might be erased if the Government passes the ministry’s proposal to the National Assembly for approval.

The ministry reasons the proposal is aimed at easing the financial burden on businesses which are grappling with difficulties in the current economic conditions. Thousands of enterprises, including State-owned enterprises (SOE), are expected to benefit. The move might get the go-ahead in October.

Many citizens have strongly protested against the proposal, saying SOEs could benefit much from the move though many of these firms have made wrong decisions by investing heavily in non-core business operations.

Therefore, it would be unfair if these SOEs continue to have their tax obligations waived. Meanwhile, a lot of private enterprises may find it hard to enjoy the proposed tax write-offs. Some economic experts have cast doubt on the transparency of the move, saying enterprises in different sectors might get different decrees of treatment, and it would cause tax revenue losses and create a bad precedent.

Do Thien Anh Tuan, a lecturer at the Fulbright Economics Teaching Program in HCMC, says in Nguoi Lao Dong newspaper that the proposed removal of tax debts is based on unclear criteria. “It is hard to know whether enterprises could benefit. I’m afraid that it is the officials with the authority to approve tax erasures who would benefit first. This is fertile ground for the ‘ask and give’ mechanism. Loss-making firms might take advantage of this to clean up their balance sheets.”

An official who used to work at the Finance Ministry says that most tax debts came from ailing companies and those having stopped operations, been dissolved or bankrupt. For such entities, debt removal is meaningless as they are already out of business. It is difficult for the State to track down late taxpayers. So, tax removals are sought as a legitimate way to deal with the debts. This indicates the tax management system is flawed as it cannot recover tax debts from ailing corporate taxpayers.

Furthermore, the proposal may leave a bad precedent as many enterprises, especially SOEs, may seek bankruptcy to do away with tax debts. They can close their troubled companies and start up a new business without bearing any responsibility for the old debts. Consequently, businesses will continue to seek ways to stay dependent on the Government’s support, instead of standing on their own feet.

They will just invest in whatever they want and then wait for Government support to solve the problems they cause. This is unacceptable and the State budget will suffer, the expert adds.

Besides, the Ministry of Finance’s proposed waiver of unpaid taxes may be rejected by the NA. A source from the NA says in Vietnam Investment Review that the ministry’s proposal looks unconvincing.

“A lot of difficulties are out there. That is a way of life,” said the NA’s Economic Committee vice chairman Nguyen Duc Kien. In 2014, a similar proposal by the ministry was rejected by the NA for the same reason.

Kien points out that the sum was in fact significant to the state budget amidst falling revenues from oil export this year.

Moreover, the number of beneficiaries is relatively small compared to the more than 530,000 businesses in operation nationwide. It is estimated that the tax waiver would benefit 5,000-7,000 small and medium-sized enterprises.

He also notes that many concessions had been made pursuant to the Law on Tax Management, including extensions of deadlines and waivers of tax debts and late tax payment fines. “In my opinion, there should not be another waiver because it might lead to unfair treatments,” Kien adds.

As reported by Tuoi Tre, economist Ngo Tri Long stresses the need for transparency. He questions whether struggling private companies and State-run firms could receive equal treatments.