VINACHEM

(VNS) Nguyen Ngoc Hung, deputy chairman of HCM City's Enterprises Association, spoke to Dai doan ket (Great Solidarity) about the proposal to reduce the business tax rate to rescue enterprises.

The Ministry of Finance has decided to reduce the business tax rate from 25 per cent to 23 per cent and apply a new tax rate of 20 per cent to small and medium-sized enterprises. What do you think of the decree?

The ministry's draft decree amending and supplementing the Law on Enterprises Income Tax should have been published earlier, especially when the economic situation has yet to see consistent improvement and enterprises badly need support from the authorities.

With a low tax rate, enterprises will invest more and gain purchasing power. This will also add to the State budget.

However, in my opinion, the decree errs when it stipulates that small and medium-sized enterprises must have less than 200 employees and annual turnover less than VND20 billion (US$960,000).

These criteria differ from those laid out in the Government's Decree 56 in 2009 and the Ministry of Finance's Article 83, which both focus on the number of employees and the total property of enterprises.

Enterprises cannot count on a consistent annual turnover. For example, a small enterprise that gets a big contract one year and earns significant profits would be considered a large enterprise under the ruling. But one year later, if this enterprise fails to get a big contract, it can access the favourable tax rate.

This is totally unreasonable and incomprehensible, as enterprises might stop doing business when they get VND19.9 billion ($955,200) in turnover to avoid paying the higher tax.

Thus, the criteria should be the number of employees and the total property of enterprises. This will encourage firms to increase their productivity while still providing favourable treatment to businesses that need it.

What are the chances that small and medium-sized enterprises will have after receiving support from authorities?

Recent measures such as tax delays and tax exemptions are temporary solutions, as we don't known whether the policies will be implemented this year.

In fact, enterprises would prefer real estate support rather than lower taxes, as the cost of hiring offices is increasing rapidly. Many enterprises said they had to pay four times as much rent as they initially paid just to keep their offices.

So will this be a good chance for small and medium-sized enterprises to bounce out of the gloomy situation?

I think enterprises who managed to survive last year will be likely to continue their business this year. But to maintain a sustainable business, enterprises must invest in production.

Let me remind you about the reduction of the tariff barrier to 0-5 per cent for regional countries. If we don't offer a support package to enterprises to help them change their products and build their own trademarks, it will be very difficult for them to compete with foreign enterprises.

I have seen some moves from the State, but changes in policy should be more explicit. For example, who will be the beneficiaries of the real estate support? How will we increase consumer demand? Everybody knows that this year's economic situation is still difficult and the State should have more policies to increase purchasing power, especially in the field of real estate. — VNS