Virginia Foote, governor of the American Chamber of Commerce in Vietnam, said that enterprises in Vietnam still suffer from various types of taxes and fees as well as irrational business conditions.
“While the government looks to boost the limited state budget by increasing the collection of taxes and fees, enterprises are reluctant to pay, as many taxes and fees are irrational,” said Foote, who is also president and CEO of business advisory firm Bay Global Strategies, LLC, at this week’s conference on facilitating Vietnam’s continued growth. The conference was organised by the Ministry of Planning and Investment (MPI).
Late last month, the Ministry of Finance (MoF) announced that it had proposed increasing the value-added tax (VAT) from the existing 10 to 12 per cent on January 1, 2019, to ensure national financial security. If the proposal is enacted, the VAT hike will affect all consumers and more than 600,000 enterprises.
“The government should not increase taxes, but create a level business field for all enterprises. When enterprises perform well, they will pay more taxes and the budget will increase,” Foote said.
Early this week, Dau Anh Tuan, head of Vietnam Chamber of Commerce and Industry (VCCI)’s Legislation Department, received a complaint from a local firm in the northern province of Thai Nguyen.
The firm lamented that for each shipment of goods, it has to pay an average US$18,200 for seaport infrastructure fees in the northern port of Haiphong, in addition to several sub-licences when importing goods into Vietnam.
“The firm’s director told me that he is mulling over reducing the size of or even shutting down the firm,” Tuan told the conference. “Each year, this firm contributes VND30 billion (US$1.36 million) to the state budget, and, like so many others in Vietnam, this firm has to pay too many types of taxes, fees, and sub-licences—though the prime minister has ordered the removal of unnecessary taxes, fees, and sub-licences in favour of enterprises.”
Recently, MPI asked the government to launch campaigns to review and reduce assorted types of business costs and conditions for firms, including loans, administrative procedures, logistics, and transport, as well as removing loopholes in state management that create informal costs for enterprises.
“Vietnam-based firms are subject to very high levels of fees and charges, and business conditions which are undermining the economy’s competitiveness,” Minister of Planning and Investment Nguyen Chi Dung said, citing many examples of financial burdens hurting enterprises.
For example, enterprises currently have to pay environmental protection fees for up to 30 years. Ironically, the fee is applied to all types of waste and enterprises.
In another case, the average transportation cost of a container from the Haiphong port to Hanoi is three times higher than from the Republic of Korea and China to Hanoi.
Moreover, the minister also said the average tax-based cost in Vietnam accounts for 39% of enterprises’ total profit, which is the highest rate within the ASEAN+4 (Indonesia, Malaysia, the Philippines, and Thailand), and double that of Singapore.
In addition, the average cost for testing a package of goods in Vietnam has increased by 1.5-2 times over the past few years, though it requires a relatively long wait of up to 10 days.
“I would say that enterprises are not in need of much more support from the government. They only need simpler administrative procedures and a clear legal system,” Dung stressed.
More than one week ago, the prime minister ordered a moratorium on raising taxes and fees until the year’s end in a bid to support enterprises.
Last month, he also ordered all ministries and agencies to review and erase all unnecessary fees and business conditions currently encumbering enterprises and investors in line with the Organisation for Economic Co-operation and Development’s “principles of a competitive market.”
Results must be reported to MPI, which will then report on the progress to the government by December.
“Many ministries are enacting sub-licences, making it hard for enterprises. For example, one ministry has issued as many as 1,220 unnecessary sub-licences, while the Ministry of Construction has the fewest sub-licences at 106,” said Mai Tien Dung, Minister and Chairman of the Government Office.
According to VCCI, Vietnam currently designates 243 sectors and professions as conditional, subject to a total of 5,719 business conditions.