Last updated: Friday, June 14, 2013
“More Energy” for Vietnam EnterprisesPosted: Wednesday, May 30, 2012
Identifying the difficulties of the business sector and the whole economy so as to initiate solutions to support growth, maintain and promote production is a heated debate at the on-going session of Vietnam’s National Assembly.
The data shows that the number of newly established enterprises in Vietnam sharply decreases while the number of halted ones increases rapidly, mainly due to prolonged high interest rate, investment reduction in consumption, and problematic financial and business managements.
Before the session, on May 16, the Government sent a report to the National Assembly Standing Committee on the issuance of a number of measures to solve production and business difficulties and support markets. In the report, the Government identified causes of business difficulties and recommended solutions.
In the first quarter of 2012, there were 18,700 temporary-suspended businesses, and 10,350 businesses were dissolved, went bankrupt or stopped operation, a 14.82 percent increase against a year ago. The data shows that some areas have higher number of halted businesses than those in the first quarter such as agriculture-forestry-fishery increased by 18.6 percent, construction 12.6 percent, trade and services 17.3 percent, hotel industry 31.6 percent and the highest is 91.3 percent in real estate.
15 out of 21 economic industries reduced their income and corporate tax debt went up 28.5 percent against December 31, 2011. The Government recognized main causes of business difficulties were the decreases in investment and consumption affected by the implementation of tight monetary and fiscal policies to restrain inflation and stabilize macro-economy. There followed a generally difficult situation of the world economy, public debt crisis in the Europe affected consumption in traditional markets and potential markets and also exports. Meanwhile, higher competitiveness among Vietnamese enterprises is growing when Vietnam implements integration commitments by reducing import tax and removing non-tariff barrier. Along with high competitiveness, reducing domestic consumption and exports difficulties, enterprises also suffered from prolonged high interest rate, rises in prices of input material for production such as gasoline, oil and electricity that increase business costs. Another cause is a subjective one related to limited standard of financial and business administration, unfocused investment in various fields that depend heavily on loans, are incapable of absorbing capital and have low added value.
The SMEs are recognized as the most vulnerable business group. Consequently, the Government submitted to the National Assembly some preferential tax exemption and reduction for this area.
On the first day of the National Assembly session, May 21, Minister of Finance Vuong Dinh Hue delivered a report on solutions to remove difficulties for business and assist markets to fight against the risk of economic downturn. He stated that the intention to lower the lending rate and implement measures for debt restructuring and other needed solutions aims at improving access to bank credit for business. The Government granted a three-month extension for the payment of corporate income tax which small and medium enterprises may pay in 2011. The Government decided to offer extension of tax payments, land use fees and reduce land rent payment including six-month extension of value-added tax payment for April, May and June of this year, nine-month extension of corporate tax payment since 2011.
Besides debt payment extension and debt restructuring, real estate enterprises with financial difficulties are desperately expecting the extension up to 12 months of land use fees.
The Government also proposed VND16 trillion that will be used to support businesses in the form of tax payment extension.
Although, the National Assembly Finance and Budget Committee did not agree with the Government’s proposal of exemption for a number of subjects, the Government persisted the point to allow some tax exemption and reduction, including 30 percent corporate income tax in 2012 for SMEs excluding some subjects and labour-intensive enterprises engaging in production and processing of agriculture, forestry and aquaculture products, garments, footwear, electronic equipment, and socio-economic infrastructure works.
The Government also decided to exempt the value added tax, personal income tax and corporate income tax in 2012 for individuals and households engaging in boarding houses, guest houses, workers’ dormitory and students’ hostels; individuals and households engaging in baby-sitting; and individuals, households and organizations engaging in supplying workers’ meals provided that rental, baby-sitting and meal supply prices are similar with those at the end of 2011.
The support package for tax exemption and other financial assistance is worth about VND13 trillion.
Minister of Finance Vuong Dinh Hue said that the Government also directs to fight against revenue loss, tax fraud, improvement in price operating and management; enhance market and price control, push up the restructuring of the SOEs and renovate financial mechanisms.
Reviewed measures of the Government to support enterprises focused on tax exemption, reduction and extension, Chairman of the NA Finance Budget Committee Phung Quoc Hien told the press that when enterprises face difficulties, it needs overall measures to help them. The foremost measure is monetary policy. It is the long term basic assistance for enterprises because in the current credit operations, cash flow goes to other areas such as buying government bonds or loans or business mutual debts rather than to the right place. A huge amount of money was poured into production sectors, while credit growth in H1 was still negative. Thus, the long term basic measure is monetary policy.