2
priority to restructuring three most important
sectors. That is, to restructure investment with
focus on public investment; restructure state-
owned enterprises that focus on corporations and
state-owned companies; and restructuring the
financial market with a focus on restructuring the
system of commercial banks and other financial
institutions.
According to IMF data, the revenue quickly
increases from 1989 to 2017. In 1989, the revenue
accounted for VND 3,899 billion (Tax revenue:
VND 1,099 billion; Nontax revenue: VND 2,800
billion) and it ups to VND 1,174,500 billion in 2017
(Tax revenue: 938,130; Nontax revenue: 236,370).
According to ADB data, total revenue was over
20% of GDP for years. It peaked in 2010 at 26,7% of
GDP and reduced in the following years because
of the economic crisis. Tax accounted for 18% of
GDP in 2000, and 17,9% of GDP in 2016 and has
changed over the years. There are many ideas that
the level of mobilization of taxes against GDP is
too high- 26% of GDP. For developing countries
like Vietnam, the level of mobilization of 20% of
GDP is reasonable.
However, due to the large investment demand,
while the size of the economy is small, the
revenue is mainly based on resources so that in
the long run, there should be a reasonable level of
mobilization to createbetter businessdevelopment.
Recently the business community, domestic and
foreign investors appreciated reform efforts that
contributed to reducing procedures and delays,
reducing the cost of implementing administrative
procedures in the field of taxation.
In terms of international tax reform ranking,
Vietnam ranked 68 out of 190 nations (increased
TAX REFORM INVIETNAM: CHALLENGES AND SOLUTIONS
TRAN THANH DUNG, LAN CHU*
This paper focuses on evaluating the challenges of tax reform in Vietnamwithin the tax reform strategy
period 2011-2020 based on the theory of monitoring and evaluation. This research uses a political
economic analysis (PEA) approach with a problem driven PEA, stakeholder, and structure to identify the
challenges of tax reforms and propose recommendations for overcoming those challenges.
Keywords: Tax reform, PEA, taxpayers, tax policies, international integration.
Received: June 22
nd
, 2018
Revised: September 10
th
, 2018
Accepted for publication: October 28
th
, 2018
Internal and external drivers of tax reform
In general, there are two main factors including
internal and external drivers of tax reform in
Vietnam. The external driver is that Vietnam is
a member of World Trade Organization (WTO)
and ASEAN Economic Community (AEC). It
was very necessary to undertake tax reforms as a
requirement for membership in such institutions,
and for better international integration. Vietnam
tax conditions were not in line with the
international requirements. Thus, in order to be
accepted in International organization such as
WTO and AEC, Vietnam needed to perform tax
reform. In this case domestic reform and the
reform of the international tax system and pre-
operational steps was the route to integration, and
are a critical challenge to tax reform in the coming
years (Thanh, 2016).
In term of internal factor, when the 2008 global
economic crisis hit Vietnam, the government
reduced its tax base collection because there
was high inflation at that time. However, after
the conditions improved government needed
to reform the tax system to increase the state’s
revenue. In the context of Vietnam’s high budget
deficits for many years, there was a need to
restructure the fiscal balance, where revenue-
driven reform is part of the process. Especially
in the years 2008-2010, Vietnam was facing high
inflation and economic difficulties.
In October 2011, Communist Party of Vietnam
decided to restructure the economy, and give
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