General Taxation Department’s deputy head Nguyen Thi Cuc in the following interview talks about tax reform. Excerpts:
What are your assessments of Vietnam’s tax collection when the country begins cutting tax in accordance with Cept/Afta (Common Effective Preferential Tariffs/Asean Free Trade Area)?
Vietnam has begun cutting various tax lines since last July and this affected the country’s budget revenue. Specifically, revenue from import duties was down compared to the previous years. However, the fall in import duties is related to other factors such as import volumes. Yet, only taxes subject to goods from Asean countries Vietnam has signed an Afta agreement with have been cut while those applying to commodities from other countries and territories remain unchanged. Tariff cuts causes various domestic industries to develop so I think on the one hand it causes the budget revenue to fall but on the other hand it helps stimulate numerous domestic industries.
How much is the estimated fall in tax receipts each year?
The cutting of import, export and enterprise income taxes caused the state budget revenue to drop by three trillion dong on the targeted amount last year. This year’s revenue is estimated to fall by almost four trillion dong including nearly one trillion dong of taxes cut in compliance with Cept/Afta and a three trillion dong reduction in corporate income tax [caused by the CIT rate reduced from 35% to 28% from January 1 2004]. In addition, the cutting of agriculture land taxes caused budget revenue to decrease by 1.5 trillion dong a year.
What will make up the losses?
We increased taxes on liquor, beer, medicine and automobiles. The 5% tax subject to cars of less than five seats shall be increased to 24% and the 3% tax imposed on 5-7 seat cars will be raised to 15%. We also increased taxes levied on some entertainments services such as discotheques and imported auto parts by some 5%. But I still believe budget revenue this year will be higher than last year.
What new policies are in line concerning taxes?
The amended Excise Tax Law, the amended Value Added Tax Law and the amended Income Tax Law are effective since January 1, 2004. The National Assembly has agreed to expand the Income Tax Decree to apply to high-income earners into a high income tax law. We will continue reforming tax procedures and operations through applying advanced technologies in administration, tax collections and tax inspections. This year about 500 enterprises in Quang Ninh Province and Ho Chi Minh City have started to make self-declarations of payable tax and to pay the taxes themselves on a trial basis.