Foreign and domestic enterprises attending the Vietnam Business Forum (VBF) 2012 in Hanoi this week have showed their concerns over the government’s cap of advertising and promotion (A&P) costs.
Alain Cany, co-chair of Vietnam Business Forum (VBF) Consortium, said that A&P costs are part of the normal costs of running a business as advertising and promotional activities positively impact the interests of consumers, businesses and the country.
Therefore, the taxation regime should not discourage enterprises from incurring expenditures on advertising and promotion, Cany said. He called for the government to move towards completely lifting the cap.
Pham Thi Thu Hang, general secretary of the Vietnam Chamber of Commerce and Industry (VCCI), echoed the opinion, saying A&P activities are very important for enterprises to compete with others in the market economy.
“Lifting this cap will mean… higher positions of Vietnamese brands and trademarks,” she said, adding many Vietnamese companies cannot promote their products as long as they are still tied by this cap – now at 10 percent of legitimate expenses – even their products have competitive quality.
As a result, the A&P cap will put local enterprises at a disadvantage in the competition and even make them lose on their home market, she said.
Hang argued that if this cap is said to protect domestic enterprises, it should be adjusted to fit with the market’s requirements in each period, instead of having been maintained for 13 years since it came into force in 1999.
The advertising restriction by imposing the A&P cost cap has left a negative impact on Vietnam, consumers and businesses over the past 13 years, said Preben Hjortlund, chair of European Chamber of Commerce in Vietnam (EuroCham).
The restriction has put up a barrier against European investment inflows into the country, Hjortlund said. Multinationals can consider investing in other markets which provide them more favourable conditions while Vietnamese small- and medium-sized enterprises (SMEs) are hardest hit, he added.
Even Quach Duc Phap, former director of the Tax Policy Department under the Ministry of Finance, agreed that the current cap is no longer suitable.
“The 13-year period for a temporary solution is too long. We should consider removing this cap because it goes against the international economic integration and reduce the competitiveness of a country,” he said.