Tax burden gets heavier
Vu Nhu Thang, head of the Institute of Strategy and Policy on Finance under the Ministry of Finance, said the average State budget revenue in the last ten years stood at 26.6% of GDP, in which revenue from taxes and fees made up 24.2%.
Thanh in his study stressed the proportion of corporate income tax, personal income tax, and value added tax in the annual State budget revenue had been rising, from 50.7% in 2001 to 64.1% in 2010 and 63% in 2011, despite the tax rates in reality have been slashed.
Specifically, the highest rate of personal income tax has been slashed from 50% to 35%, while corporate income tax has been brought down from 32% to 28% and later 25% in early 2009. Besides, the State removed the value-added tax rate of 20% in 2004.
Speaking at a workshop in Hanoi last week, Thang said: “Vietnam is facing a basic contradiction, which on one hand demands reducing State budget collections to encourage production and business activities and facilitate capital accumulation of businesses, while on the other ensuring the resources to cover State budget spending.”
The average State budget spending in the 2001-2010 period accounts for 30.6% of GDP. However, the total budget expenditures in 2010 increased by 6.2 times compared to 2000.
Under the socio-economic development plan for the period from 2011 to 2015, the rate of State budget revenue from taxes and charges will have to drop to below 22-23% of GDP.
Warning of the National Assembly
A report of the National Assembly Economic Committee states: “Protectionist polices and overlapping taxes result in each Vietnamese people suffering a rate of tax and fee to GDP at 1.4-3 times higher than other countries in the region.”
Regarding personal income tax, although Vietnam has quite similar tax brackets to other countries, the taxable incomes are much lower.
For example, the income subject to a tax rate of 10% in Vietnam is some US$3,400-5,100 per year, whereas the corresponding figures in Thailand and China are US$4,900-16,400 and US$3,800-9,500 respectively.
Similarly, a fixed corporate income tax rate of 25% is applicable for all businesses in Vietnam, while the tax varies from 2% to 30% in other nations.
Moreover, Vietnam levies many other high taxes, such as excise tax and import tax. In addition to taxes and fees, Vietnamese enterprises have to pay high informal costs.
The report says that Vietnam’s budget revenue from taxes and charges, excluding crude oil, is currently very high compared to other regional countries. Specifically, in the last five years, the average ratio of tax and fee collection to GDP of Vietnam is around 24%, versus 17.3% in China, 15.5% in Thailand and Malaysia, 13% in the Philippines, 12.1% in Indonesia and 7.8% in India.
The committee warned that the high ratio of tax revenue to GDP had limited the ability to accumulate capital, hindered investment, development, and improvement of the private sector’s competitiveness, and encouraged frauds and corruptions.
