Growth in the private sector is expected to increase the state’s tax revenues, according to general Department of Taxation deputy director Nguyen Van Huyen.
Private sector tax collections will constitute a significant proportion of the country’s total revenues, said Huyen, making up for declining tax collections from state-owned enterprises (SOEs) and from the loss of revenues from import-export taxes which were recently decreased as part of Vietnam’s process of lowering trade barriers and integrating into the regional and global economy.
In the first three quarters of this year, the private sector contributed about 11.3 trillion dong (US$706 million) to the state budget, the taxation department reported. Huyen estimated that the private sector would contribute a total of about 17 trillion dong to the state budget this year, a yearly increase of about 28%.
The number of private firms was expected to increase rapidly in the next few years, said Huyen.
“There will be around 450,000 private enterprises by 2010 with more than 35,000 private firms established annually,” he said.
Nearly 175,000 private firms have been established to’ date, operating in such forms as limited liability companies and joint stock companies. More than 20,000 new enterprises were set up in the first eight-months of this year.
The private sector contributed 20% to the country’s gross domestic product, creating about 7 million jobs, according to the General Statistical Office.
Capital investment in private enterprises has continued to grow, with invested capital increasing from 960 million dong (US$61,150) in a firm in 2000 to 2.5 billion dong (US$159,240) in 2004. Private sector turnover has grown from 365 trillion dong in 2002 to 485 trillion dong (US$30 billion) in 2003.
Nevertheless, Huyen noted, losses in tax collections from private sector remained large. While state-owned enterprises in 2004 contributed 7.85% of their turnover to the state budget, and foreign-invested enterprises fully 13.65%, private domestic companies only paid 4.12% of their total turnover in taxes.
Audit of 93 private enterprises, Huyen said, resulted in the collection of about 12.5 billion dong in taxes due by 2004.
Meanwhile, the Hanoi office of the general Department of Taxation collected almost 200 billion dong from over 2,700 private sector enterprises operating in the capital.
“The general Department of Taxation and its branches in provinces and cities are facing difficulty in managing and collecting taxes from private companies because of falsification of financial statements,” Huyen said.
“What is more, many private enterprises have illegally sold blank invoices to benefit from value added tax reimbursement.