Vietnamese taxes are still for the poor

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Saying "raising taxes on consumers is against the market economy" is not accurate

Along with the tax collection solutions, the Taxation has made efforts in administrative reform to create maximum conditions for taxpayers.

Potential for increase in consumption tax

Speaking at the Vietnam Finance Forum 2017, many people said that tax reform should be further promoted. The international trend is gradually reducing direct taxes and gradually increasing the role of indirect taxes such as VAT and commodity tax. This is a solution suggested by experts to restructure revenues and consolidate sustainable budget.

Regarding the urgent necessity of the tax system reform, Nguyen Van Phung, Director of Big Corporate Tax Department under the General Department of Taxation said that rate of tax incentive in recent years have tended to decrease because we have continuously reduced the level of incentives. The reduction of corporate income tax, reduction of personal income tax (raising family allowances) and reduction of import duty, etc showed the potential risk of further reduction of tax incentives rate on GDP in coming years. So, it is difficult to secure resources for sustainable development.

According to Mr. Phung, in order to implement the sustainable development strategy with specific targets set for 2020, we must have sustainable financial resources. Financial resources can only be secured by both cutting expenditures and maintaining the rate of the tax incentive, fee incentive and charge incentive at a reasonable level. Accordingly, it is required to ensure the overall balance of structure between the indirect taxes and direct taxes; between taxpayers and consumers at different income level". Mr. Sebastian Eckardt stated that the global trend is shifting from income tax to consumption tax. Current taxes have still increasing potential such as taxes on socially harmful goods (Sin taxes). Vietnam's standard VAT rate is still lowest in the region. Vietnam’s corporate income tax is also very competitive compared to the region, but the base for tax calculation is being narrowed due to tax preferential policies. Property tax is still low and the potential to develop a periodic tax policy for land and special assets at local levels is realized.

"This is a very important tax because it is significant revenue for the budget, but it can also promote land use and strengthen local governance," said by Sebastian Eckardt.

According to the World Bank's analysis, Vietnam's tax system is still for the poor due to the difference in tax burden for families with different income levels, in which the rich families will be affected more than families with lower income. Thus, if VAT rate is increased, the rich will have to pay taxes at a higher rate than the poor. At the same time, with the personal income tax deduction of 9 million, the impact of personal income tax on families is not big.

It is required to impose a tax on assets quickly

At the Vietnam Finance Forum in 2017, Dr. Nguyen Thanh Long, Chairman of the Hanoi Stock Exchange presented solutions for public finance reform in Vietnam, in which emphasizing the reform of budget revenue and tax system.

According to him, after the global financial crisis and public debt 2008, the international trend is gradually reducing direct taxes and gradually increasing the role of indirect taxes such as VAT and commodity tax. Countries want to use this tool to stimulate business growth, creating momentum for the economy’s recovery.

Mr. Nguyen Thanh Long said that management agencies should promptly research the tax imposition on the property (real estate tax) in accordance with international practices. Because this is a very popular tax in the world to mobilize more revenues for local governments to invest in infrastructure development.

"It is a fact that the State has invested in infrastructure, the value of real estate has increased but there is not yet an appropriate mechanism to regulate this added value, thereby sharing benefits with the social community through tax," said by Mr. Nguyen Thanh Long.

According to E & Y reports, indirect taxes in OECD and European countries account for 50-60% of total state budget revenue. In China, this rate has nearly doubled, from 33% in 2004 to over 60% in 2016.

Therefore, Vietnam should also further consider increasing rate of incentives from indirect taxes and consumption taxes to consolidate the sustainable budget.

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In addition, the continuing to improved tax policies to ensure equity, efficiency, effectiveness, simplicity and transparency and the tendency of gradually reducing these taxes to encourage investment and support the business growth. Reviewing to gradually cutting inappropriate tax incentives. Strengthening discipline, rules, anti-fraud and anti-tax loss.