Income tax exemption favours “little guy”

VietNamNet Bridge – The Prime Minister’s instruction on the corporate income tax (CIT) reduction for businesses has been applauded by tax payers. However, a question has been raised: Which businesses will enjoy the tax reduction?

Prime Minister Nguyen Tan Dung at a finance conference on December 3 said he had asked the Ministry of Finance to promptly implement the tax incentive policies for businesses, including the 30% reduction in corporate income tax (CIT) for businesses in Q4, 2008, and the further 30% CIT reduction for businesses experiencing difficulties in 2009. Businesses will enjoy the tax payment extension of 6-9 months, while the government has also asked for decisions on VAT tax refunds to be made quicker.

Minister of Finance Vu Van Ninh has clarified that the CIT reduction will be applied to small- and medium-size enterprises (SMEs), and those businesses meeting difficulties in production and export.

Pham Van Huyen, Deputy General Director of the General Department of Taxation (GDT), said that GDT will join forces with ministries and branches to discuss and set up the criteria for CIT reductions. Many factors will be considered to decide whether or not businesses can enjoy tax reductions. The two most important factors are capital and labour force.

Huyen said that the criteria for CIT reductions for SMEs will be built up and promulgated first. Under the decree on defining SMEs, SMEs are businesses which have the capital of less than VND10bil, employ fewer than 300 labourers.

The announcement has been applauded by economists and businesses, as a 30% tax reduction is not insignificant at all.

Cao Sy Kiem, Chairman of the SMEs Association, said that to ensure fairness, the tax reductions should be applied to all businesses, but differentiate between the levels of hardship the businesses are facing.

Kiem said that SMEs and the most bogged-down enterprises that make products for exports should be given higher tax reductions than big corporations and economic groups.

Meanwhile, Vu Duy Thai, Secretary General of the Hanoi Industrial and Commercial Association, said that the CIT tax reductions should be implemented with the focus on non-state enterprises.

Thai is worried that there are not clear criteria about which businesses are considered SMEs. “It is very necessary to set up criteria for CIT reductions, or the ‘ask-and-grant’ mechanism will appear with the tax reduction,” Thai warned.

Dr Nguyen Dinh Cung, Head of the Macroeconomic Management Studies Department under the Central Institute of Economic Management, also thinks that CIT should be applied to enterprises of all economic sectors. If CIT tax reductions are applied to SMEs only, this will cause protests from foreign-invested enterprises and state-owned enterprises.

Meanwhile, some enterprises say that they do not expect much from the tax reductions. The things that they most want from the government are policies on the information market and investment support. The enterprises also said that the tax reductions would only bring desired effects if they were implemented alongside the resolution of the problems in the business environment.

(Source: Saigon tiep thi, VietNamNet)