Too much tax red tape hurting small businesses

Arduous tax procedures were burdening small and very small enterprises with extra costs, a seminar heard yesterday.

The statement was heard at a seminar entitled "Simplifying tax administration procedures for small to medium enterprises in Vietnam", held by the General Department of Tax (GDT), the International Finance Corporation (IFC) and the World Bank Group.

According to GDT and the General Statistics Office, there are around 180,000 private enterprises and nearly three million household businesses in Vietnam. Their strong growth provides more than one million new jobs a year.

Unfortunately, many find that tax payment and tax management is not easy. Most small and very small businesses suffer from limited management and capital.

Their revenue counting methods also fail to use standard accounting documents and operate primarily in cash.

These enterprises are levied at a certain tax level in accordance with estimated revenue recognised by their neighbours, nearby enterprises and local tax authorities.

Costs higher

Enterprises, using standard accounting documents, are not subject to such estimations.

"Tax law does not favour small private businesses, and their costs in terms of both time and money to comply with tax responsibilities were often higher than larger businesses," said Le Hong Hai, deputy head of GDT.

Jan Loeprick, an IFC expert on tax reform, said that current procedures encouraged enterprises to avoid tax assessment and payment which badly affects the state budget.

Deterring corruption in tax administration procedures could only be done once authorities publicly announce all necessary regulations and procedures, said Loeprick.

Richard Stem, another expert from IFC, agreed, adding that simplifying tax procedures would improve the attractiveness of Vietnam's investment environment.

What to do

To deal with this situation, the General Department of Tax has developed it a plan to simplify tax procedures and tax administration forms.

The general department has been co-operating with the International Monetary Fund, Japan International Co-operation Agency and the World Bank.

Under the latest Memorandum of Understanding between IFC and GDT, effective from July 2008 to December 2010, IFC will support research on small enterprises in Vietnam, to review unnecessary tax procedures and propose solutions for tax form reforms.

Stem added that all reforms should maximise transparency in tax procedures, minimise processes and redesign tax services. Reforms should converge with licensing procedures.

Vice director of the Department of Tax Policy under the Ministry of Finance Nguyen Van Phung noted that any reform should be thoroughly reviewed and policy markers should ensure feasibility ahead of initiation. (Viet Nam News)