Lower Corp Income Tax Cuts US$312.5Mln from State Budget

The State budget will be cut off by VND5,000 billion (US$312.5 million) per year if the Vietnamese NA ratify the amended corporate income tax (CIT) law, under which the CIT rate is proposed to reduce to 25 per cent from current 28 per cent.

 

The cut does not mean a loss in State income as Vietnam will have an estimated 500,000 enterprises by 2010, NA Deputy Chairman Uong Chu Luu said at the on-going NA Standing Committee meeting, where a majority has agreed with the reduction.

 

CIT rate reduction will encourage the economy and facilitate businesses to increase capital and raise their competitive edge, the meeting heard March 26.

 

The tax rate of 25 per cent is also expected to assist enterprises to call for investment and promote production and trade while still guaranteeing collection for the State budget.

 

The participants also suggested clearer regulations for a tax preference policy in order to encourage investment and ensure equality in collecting corporate tax.

 

At a time when the economy is facing many challenges, CIT tax rate reduction will help create a favorable investment environment and facilitate businesses’ production and trade, members of the NA Standing Committee said.

 

Globalization has led to fiercer competition between countries in attracting foreign investment and most countries have used CIT rate reductions to lure capital. Singapore, which is considered very favorable, decided to lower their CIT from 20 per cent to 19 per cent, the Philippines from 35 per cent to 30 per cent. (Vietnam Economic Times, VNA)