Domestic sector to cover shortfall in budget collections

The government is set to increase State budget collections from the domestic sector to offset lower collections from imports and exports.

With 12 free trade agreements (FTAs) signed to date, the Deputy Director General of the International Cooperation Department at the Ministry of Finance (MoF), Mr. Pham Tuan Anh, believes that State budget collections from imports and exports will decline by 20% to 25%.

Mr. Pham Tuan Anh, at the press conference on the pros and cons of FTAs and their impact on State budget collections from imports and exports on October 5, remains positive about the eventual outcome, however, as “the benefits from the implementation of commitments will have a positive impact on the country’s economy and enhance its competitiveness.”

domestic sector to cover shortfall in budget collections hinh 0

The General Department of Taxation (GDT) recently announced tax collections of VND53.5 trillion (US$2.4 billion) in September, equal to 6.6% of the annual plan and 113.2% of the figure in September last year.

The figure in the first nine months was therefore VND568.1 trillion (US$25.6 billion) (excluding divestments from State-owned enterprises - SOEs), or 75.2% of the annual plan.

Though tax collections from many sectors were higher than expected, especially land taxes, those from SOEs remained low.

The GDT put the result down to the poor state of the economy and natural disasters and, in particular, GDP in the first half coming in lower than last year’s first-half figure. Investment effectiveness is still low and workplace productivity has barely increased. The index of industrial production (IIP) for the first eight months stood at 6.9%, down significantly on the 9.8% recorded in the same period last year.

Some new tax policies have also constrained businesses and taxpayers and hit State budget collections. Law No. 32/2013 and Law No. 71/ 2014 are estimated to have cut corporate income tax payments by around VND7.5 trillion (US$338.1 million). Law No. 106 came into effect on July 1 and will cut collections in the remaining months of the year.

Law No. 106 changed Value Added Tax (VAT) policy, with refunds not provided in cases where input VAT has not been fully deducted after 12 months or four quarters. The VAT amount not fully deducted in a month or quarter (including cases of accumulation over 12 months or four quarters) is only transferred to the deduction in the next period instead of a refund. This change will lower VAT collections.

Total import and export turnover in the first eight months grew at a slower pace than in the same period last year while the number of enterprises shutting down remains high. Figures from the General Statistics Office (GSO) reveal that 45,097 enterprises either shut down or ceased operations in the first nine months of the year.

Ms. Dao Thi Thu Huong, Deputy Director of the General Department of Customs’ Import-Export Tax Department, said the government’s aim to improve Vietnam’s attractiveness by lowering import taxes together with falling crude oil prices have eaten into State budget collections.

Over the final three months of the year Ms. Huong believes that “MoF will introduce solutions to increase State budget collections from the domestic sector.”

VN Economic Times

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