Government proposes to reduce 30% of corporate income tax payable by 2020

Minister of Finance Dinh Tien Dung

Help businesses overcome difficulties

Under the authorization of the Prime Minister, presenting the Statement on the draft Resolution of the National Assembly on reduction of payable CIT of 2020 for enterprises, cooperatives, non-business units and other organizations at the National meeting this morning, June 11, the Minister of Finance Dinh Tien Dung stated that the Government proposed to reduce 30% of the payable CIT amount of 2020 for enterprises whose total revenue in 2020 does not exceed VND50 billion and the average number of employees participating in social insurance in 2020 shall not exceed 100 people.

The proposed tax reduction for small businesses "with a total turnover in 2020 not exceeding VND50 billion and an average number of employees participating in social insurance in 2020 not exceeding 100 people" to ensure effectiveness of support policies, avoiding spread of incentives.

In fact, the number of small and medium-sized enterprises account for 97% of the total number of enterprises in Vietnam, and if the application of tax reduction policies for medium-sized enterprises is almost all enterprises in Vietnam enjoy tax reductions and do not make much sense to prioritize development.

"At the same time, this can lead to unequal competition between medium-sized enterprises and small-scale businesses while medium-sized enterprises already have more advantages (capital, business, revenue, market, labor, technology)," Minister Dinh Tien Dung said.

In addition, the Ministerof Finance also affirmed that the proposed tax reduction policy for small-sized enterprises mentioned above was also based on the calculation of the ability and conditions of the state budget in the current context.

Regarding the temporary payment and finalization of tax, in accordance with the Law on Tax Administration, enterprises shall calculate, self-declare and self-pay taxes.

Therefore, enterprises will base on their actual situation to determine whether they are eligible for tax reduction or not to reduce 30% of the CIT amount when temporarily paying quarterly tax and finalizing the enterprise income tax of 2020.

In the perspective of the verification agency, Chairman of the Finance and Budget Committee of the National Assembly Nguyen DucHai stated: “Most opinions in the TCNS Committee agree with the Government's Report on reducing the tax amount to be paid (30%) and apply two criteria that are revenue (less than VND50 billion), combined with labor criteria (less than 100 employees) to implement the policy of CIT reduction.

However, some people said that the Resolution provides a general direction for all subjects without clearly classifying criteria on revenue, labor and actual damage resulting in a level of equality; some businesses with high revenues and profits during the pandemicperiod are entitled to this tax reduction policy is unreasonable, while the goal of the issuance of this Resolution is to target the groups in real difficulty and need support in the period of pandemic.

“Therefore, the proposal should specify the scope of the Resolution to only apply to those subjects whose revenue in 2020 is reduced compared to revenue in 2019 or the revenue reduction from 30% in 2020 compared to 2019,” Chairman Nguyen DucHai said.

Reducing budget revenue by nearly VND16,000 billion

Assessing the impact of the proposal, Minister Dinh Tien Dung said that according to estimates, the proposed reduction of 30% of the payable CIT amount of 2020 for small-sized enterprises will reduce the state budget revenue by about VND15,840 billion and if continuing to expand and reduce tax for medium-sized enterprises, it could reduce the state budget revenue by about VND22,440 billion.

However, the proposed reduction of 30% of the CIT payable for small businesses by 2020 will contribute to supporting these businesses to overcome difficulties due to the impact of the Covid-19 pandemic, facilitating small-sized enterprises to accumulate capital to develop production and business, as well as improving their competitiveness, which is a premise to help small-scale businesses grow and transform into bigger ones to contribute to the state budget in the future.

In order to overcome and offset short-term impacts on state budget collection as well as ensure the initiative in managing the State budget estimates, the Government has directed the Ministry of Finance to coordinate with the concerned ministries, branches and localities to focus on directing the effective implementation and implementation of Tax Laws.Continue to reform and modernize the tax system, simplify tax procedures; at the same time, drastically managing the state budget collection, focusing on timely and effective implementation of groups of solutions for collection management, preventing revenue loss, transfer pricing, tax evasion and handling tax debt recovery.

In addition, the head of the finance sector also stated that the Government had submitted Report No. 234/BC-CP of May 19, 2020 to the National Assembly on additional evaluation of the State budget implementation results in 2019, implementing the State budget estimate in 2020; which has calculated the factors affecting the reduction of state budget revenues in 2020 and proposed overall solutions to the National Assembly.

The Government will direct and closely monitor the budget situation in 2020 to report to the National Assembly at the year-end session.