Last updated: Thursday, May 23, 2013
NA Approves Several Tax Solutions to Rescue EnterprisesPosted: Monday, July 02, 2012
After nearly one month of the regular meeting, the National Assembly (NA) of Vietnam approved a number of decrees on tax with a view to tackling difficulties for organizations and individuals as well as stimulating production and business of the enterprise community.
According to the NA’s Resolution, SMEs are entitled to a reduction of 30 percent of the income tax they have to pay in 2012. Besides, value added tax (VAT), personal income tax (PIT) and corporate income tax exemption is applied for households and individuals providing accommodation service to workers, laborers, students and pupils; households and individuals providing baby-sitting service; households, individuals and organizations supplying food for workers on condition that they maintain stable prices as offered at the end of 2011.
In order to lessen laborers’ difficulties, the NA also approved PIT exemption from July 1, 2012 to December 31, 2012 for individuals having monthly taxed income at level 1 according to the Partially Progressive Tariff stipulated in Article 22 of the Law on Personal Income Tax No. 04/2007/QH12. It is estimated that over 70 percent of laborers are currently having taxed income subject to level 1. The mission to provide detailed regulation for the Resolution has been assigned to the Government by the NA.
Not similar to VAT reduction, income tax reduction will only affect intermediary products. The influence on the market, therefore, will be longer. There are many opinions that lowering income tax will not be of great help to enterprises since enterprises subject to income tax payment are profit-making ones. Enterprises in need of assistance are loss-making ones. However, the law of the market has its own argument. That is market elimination according to market demand. Enterprises whose management is poor and quality uncompetitive will surely make loss and vice versa. Hence, it is more practical to extend support to profit-making enterprises. This is a move aiming at encouraging economic operation in a market economy.
According to economic experts, if the impacts cast by monetary policies on money supply and interest rates are immediate, those exerted by fiscal policies are recognized at a slower progress. Lowered lending interest rates immediately help enterprises drive their operation cost down and thereby lower product prices. However, it takes two production cycles for income tax reduction to bring about similar influence. As such, in order for the product prices to be lowered and social consumption boosted, time is needed for the policies to “touch” all production stages.