|Taxpayers wait for completion of tax procedures at the Hanoi Tax Department.
Most recently, the MoF’s proposal to impose auxiliary property tax rate of 0.3%-0.4% per property value for houses worth from VND700 million (US$31,000) and up, was the subject of controversy.
Since 2017, the MoF had repeatedly proposed amendments to current tax law towards increasing the number of tax rates.
From hiking environmental protection tax on petroleum to increasing value-added tax (VAT) from 10% to 12% while reducing the number of goods entitled to 5 percent VAT, or special consumption tax on soft drinks, the MoF is intent on restructuring State budget revenue via both direct and indirect taxes.
As such, it was no surprise that representatives from the business community and financial experts were skeptical of the ministry’s tax plans, as evident at a quarterly conference held by the National Economics University (NEU) last week.
Dau Anh Tuan, Director of the Legal Department at Vietnam Chamber of Commerce and Industry (VCCI), said he himself was "dazzled" by these proposals due to their complexity and severity.
He said the amendments of VAT, special consumption tax, corporate income tax, personal income tax, natural resource tax and export-import tax, would involve 30 different kinds of minor taxes, and they were all rising.
Nonetheless, Tuan agreed that such increases in tax rates will result in strong revenue gain, but the MoF must take into account that enterprises are also facing other high costs such as increased minimum wage and gasoline prices.
Therefore, he argued that increasing taxes will have an immediate negative impact on business performance, as he believed on average costs are rising faster than revenue growth, and additional tax hikes would harm small and medium enterprises.
Ngo Tri Long, former head of Price and Market Research Institute under the MoF, said that since tax hikes are often a sensitive issue, there should be a detailed roadmap.
According to Long, since VAT is "regressive", meaning low-earning people have to spend a larger proportion of their income on consumption, the tax burden on essential goods will be higher for them than high income earners.
Phan Duc Hieu, Deputy Director of the Central Institute for Economic Management (CIEM), also said that the proposed VAT increase would bring immediate gains to the State budget but would ultimately be a negative due to decreased purchasing power.
Phan Huu Nghi, head of the NEU’s Public Finance Department, said that increasing indirect taxes is a correct trend for Vietnam, simply because they are easier to collect and control.
Ta Loi, head of the NEU’s International Business, proposed replacing VAT with another tax on additional cost to avoid tax overlap and tax fraud, which can be set at the same level as corporate income tax on all consumable goods, and on a voluntary, independent and self-monitoring basis.
Nguyen Van Phung, Director of the Large Taxpayers Management Office under the General Department of Taxation, said that the MoF’s draft law proposals were simply part of a long-term scheme for taxation restructuring, and that they were “within reason”.
These tax incentives are far from the tax system reform targets for 2011-2020 of 24% worth of annual GDP, as at the moment it is only 18.1%.
Therefore, the MOF will and must amend a number of tax laws, though they had proved to put great pressure on the public, said Phung.
According to experts, citizens’ average income is still lower than the world’s average, so policymakers need to set a reasonable limit, as well as emphasising not just tax hikes but also avoiding losses from tax fraud and evasion.