REVIEW
of
FINANCE -
November, 2018
9
enterprises, leading to low competitiveness. This
is a great disadvantage in the context of the deep
economic integration.
- SMEs are also facing many difficulties in tax
administration procedures. SMEs still encounters
difficulties in declaring taxes. Tax administrative
procedures are still complicated and lack of
consistency leading to waste of time and incurring
costs of businesses.
* Causes of the limitations
On the side of tax agencies: administrative
procedures are overlapped, complicated and
lack of consistency causing low effectiveness.
Management approachandcapacityof taxofficials
are limited and not relevant to the functional tax
management model. The current IT system of tax
also shows limitations in processes, technology
and automate capacity due to complicated
development phases that database of tax are
scattered in tax agencies of all levels.
On the side of enterprises: the transparency
in their business operations is not ensured,
simultaneously, the practices of tax fraud and
tax invasion such as increasing expenditure
to lower profit before tax impact negatively
on the performance of tax policies. There are
also enterprises that lack of tax responsibilities
towards the State.
Recommended solutions for
improving tax policies
The context of integration is imposing
considerable pressure on economy and enterprise
community of Vietnam. Tax support policies are
instruments that are usually used to facilitate
and promote the development of SMEs. To
improve these tax support policies in Vietnam,
it is essential to have appropriate solutions for
typical condition, development context or phase.
Firstly,
it is essential to apply a specific income
tax rate for SMEs to help them remove difficulties
from economic crisis and recession. In fact, the
Government has released temporary income tax
rate toward SMEs. Specifically, the Decree No.
92/2013/ND-CP of the Government dated March
18
th
2013 regulated that enterprises that had
annual turnover less than VND 20 billion would
be applied income tax rate of 20% since July 1st
2013. However, since January 1
st
2016, SMEs
were applied the tax rate 20% similarly to other
enterprises.
A draft resolution of the Government on
measures relating to tax to remove difficulties
or barriers and to facilitate development of
enterprises regulated that “Enterprises that have
total annual turnover less than 20 billion dong
will be applied an income tax rate 17% since
January 1
st
2017 to December 31
st
2020”. Lately,
a draft law on SMEs supports of the Ministry of
Planning and Investigation also recommended
that microenterprises and SMEs would
benefit income tax rates of 5% and 3% lower
than normal rate respectively. Accordingly,
microenterprises would be applied income tax
rate 15% and SMEs would be applied 17%. The
tax rates of 15% and 17% are opportunities for
these enterprises increase their reinvestment
funds, expand business scales and improve
competitiveness.
The author recommends directions to improve
tax policies towards SMEs:
- A specific income tax rate should be applied
to SMEs; this rate should be lower than normal
rate. For example, if normal income tax rate is
20%, tax rates for microenterprises and SMEs
should be 15% and 17% respectively.
- For the business income tax subject, the
criteria of SME should be revised as stipulated
in the Law on Business Income Tax No. 32/2013/
QH13; this means the determination of SME
criterion of previous year turnover less than
VND 20 billion.
- It is essential to have a tax reduction routine
for the SMEs.
The reduction in business income tax from
SMEs does not affect considerably the State
budget revenue due to the fact that SMEs
accounts for greater number of enterprises but
less contribution to the State budget. Calculating
business figures of 2015, The Ministry of Finance
announces that if SMEs are determined by the
criterion of annual turnover less than VND 20
billion, the number of SMEs accounts for 86.2%
but the income tax revenue is only VND 2,746
billion, equivalent to the State budget reduction
of VND 473 billion.
In a draft Law on SMEs supports of the MPI
