Continuing Tax Reform to Facilitate Taxpayers

Looking back at the performance of the national tax sector in 2007, as well as forward to the sector’s goals in 2008 when the country has to gradually fulfil its tariff cut commitments to the World Trade Organisation (WTO), VIB Forum correspondent Le Hien interviewed Nguyen Van Ninh, Head of the General Department of Taxation (GDT).  

 

In order to meet all requirements of global integration, State-owned administrative organs need further reform to catch up with all the requirements of the new era. 2007 was a fruitful year for the sector, witnessing strong mechanism reforms including tax policy, to fulfil WTO commitments.

 

The Law on Tax Management came into effect on July, 2007. Tax agencies at all levels instructed taxpayers to obey regulations of the Tax Management Law, as well as tightened control over tax management activities in line with the law. The Tax Management Law defines rights and obligations of taxpayers, tax agencies and staff as well as all relevant organisations and individuals. Tax procedures have been further improved to facilitate taxpayers.

 

The Individual Income Tax Law was approved in the second Session of the 12th National Assembly, laying a legal framework to regulate local incomes. The law is part of national tax policy reform, ensuring social equality, stability for the state budget and global integration.

 

 The trial project on financial disclosure was finished. The mechanism was applied nationwide from July 1, 2007. The “one-door” policy has been also widely applied to assist tax agencies in dealing with tax procedures, creating favourable conditions for taxpayers and improving service quality at tax agencies.

 

To better reform tax policy, the sector has launched programmes and activities focusing on upgrading infrastructure, and training human resources. With these efforts, the sector has gained big achievements over the past years with 2007 total domestic revenue of VND233,300 billion, some 4.4 per cent higher than the set target and 13.6 per cent higher than 2006. The sector also met or surpassed all targets for the year. 62 out of 64 localities nationwide fulfilled and surpassed levels set by the State. Local state budgets have continuously increased. Particularly in 2007, 46 cities and provinces reported domestic revenue over VND500 billion, three localities more than in 2006; some 30 localities reported domestic revenue of over VND1,000 billion, eight localities more than in 2006.

It is important to affirm that tax is only one component of prices, not a decisive factor. In the year since WTO accession, Vietnam gained economic growth of over 8.5 per cent. Therefore, higher demand for vital goods including oil, gas, steel and cement are inevitable. The higher demands have also contributed to higher consumption prices. Tax reduction is not an effective tool to control higher demand for such vital goods. The important is that Vietnam should work out proper long-term strategies for economic development so that economic sectors can take the initiative, especially in prices control.

 

To ensure stability for national economic development, the Government has applied its financial policy to regulate such activities. The Government has cut taxes on oil and steel ingot imports. Directive 1818/2007/CP-TTg was issued August 1, 2007 on urgent measures to control local consumption prices. Realising Instructions of Prime Minister, the Ministry of Finance has enacted regulations on tax reduction for 18 import goods that are in high demand. Measures mapped out include completely cutting taxes on second-hand passenger car imports, controlling fees as well as illegal fees, stabilising taxes on household and individual business, and tightening control over business activities, especially big distributors. After the government’s actions, prices of some goods including steel ingot have been reduced considerably. Meanwhile, goods whose local demand epend on world price fluctuation are still facing price increases, though at a slower rate since regulations on tax reduction for daily goods took effect.

 

Since the beginning of 2007, based on WTO commitments, the Ministry of Finance has cut 1,812 import tariffs, accounting for 17 per cent of the total tariff commitments. One year after WTO accession, the local economy has strongly developed with GDP growth of 8.5 per cent, a record over the last decade. Export turnover reached around US$48.3 billion, up 21.5 per cent over 2006. FDI attraction also set a record of US$20.3 billion. Local economic sectors are gradually getting a foothold in the market and are able to deal with market changes. However, Vietnam is facing difficulties and challenges with a higher consumption price index and poor infrastructure, which negatively affect national economic development and the state budget.

 

Last year, the tax sector reported total domestic revenue up 9.4 per cent compared to the target and up 15.6 per cent over 2006. Taxes collected from economic sectors reached about VND112,733 billion, up 22.2 per cent against 2006. This is stable revenue contributing to the state budget. Notably, taxes collected from the private sector surpassed VND30,000 billion, up  43.4 per cent over 2006. Taxes collected from individuals reached VND7,481 billion, up 22.3 per cent compared to the set target and up 44.4 per cent over 2006.

 

In 2008, taxes collected from crude oil, land use, and real estate are expected to fall. The establishment of the science development fund will also negatively affect state budget sources.  Vietnam’s economy is expected to widely develop this year to comprehensively integrate into the world. Based on WTO commitments, Vietnam has cut 1,700 import tariffs which would negatively impact national state budget sources.

 

The 12th Session of the 12th National Assembly has set tasks for the sector in 2008. Accordingly, the sector will manage VND254,900 billion. Of that figure, total revenue from land use excluding crude oil is up 18.5 per cent over 2007. The Government has also set tasks for the tax sector.

To fulfil the 2008 targets, the tax sector has set some key tasks including speeding up comprehensive tax policy reforms approved by the Government and the Ministry of Finance; practising thrift and battling corruption. The sector has also mapped out measures for the year including cooperating with mass media organs to raise taxpayer awareness, tightening control over tax collection and management, comprehensively applying seven solutions to tax debts in line with the Law on Tax Management, and joining hands with relevant agencies in adjusting financial sanctions which are harmful to state budget sources.