Long-term plans needed to support local businesses

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Hanoi Times English - 68 month(s) ago 7 readings

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The Hanoitimes - Economist Pham Chi Lan has recommended some policies to be adopted for sustainable long-term development after the government announced the aid package for local businesses.

The adoption will help local firms to be more confident in doing business as the situation in 2013 and the coming years may get tougher, she said.

“Many experts, including me, mentioned reduction in corporate income tax in the workshop held by the Economic Committee of the National Assembly in the central city of Da Nang last month, under the chairmanship of National Assembly (NA) Deputy Chairman Nguyen Thi Kim Ngan.”

“Ngan showed that she listened to our advice.”

“The package offers many solutions, including tools o­n credit and tax breaks, as well as some relief for the costs of land lease.”

What is good about the package is that it is aimed at small and medium enterprises (SMEs), not a widespread support scheme like the o­nes in 2008-2009.

However, its timing is a little bit slow as too many companies are already beleaguered with insurmountable hardships.

“I still expect those solutions to be viewed for long-term rather than just temporary implication as we have o­nly extended the value added tax (VAT), and corporate income tax (CIT) for o­nly some months.”

Regarding the CIT, Lan said it should be cut further since it is still high, at 25 percent, compared to the ASEAN regional rate of 17 percent. Such high tax rate has reduced the competitiveness of Vietnamese enterprises significantly.

For local businesses to effectively plan their long-term business prospect, they cannot just depend o­n short-term support policies announced by the Government.

Currently, there is no guarantee that everything will progress smoothly, or the local economic recovery process will be sustainable, so they can map out long-term business plans.

“We encourage companies to do business in the long term, but all the government measures, including the relief package, are o­nly short-term in nature, making it impossible for them to make medium- or long-term business plans.”

Asked to elaborate o­n her recommendations for long-term solutions, Lan gave Tuoi Tre the big picture.

“Actually, the difficulties facing businesses at the moment are mostly problems inherent in the local economy that has accumulated over the years from 2008 to date; they’re not new problems.”

“Meanwhile, the global economic conditions and domestic situation are getting complicated.”

“As a result, the VND29 trillion package the government has just announced will o­nly help relieve some of their difficulties in 2012. How about next year in 2013, when the common problems of the economy are still there?”

“Specifically, how the economic restructuring process will be conducted and how drastically it will be done to bring about long-term sustainability are the main concerns.”

“If unsuccessful, enterprises would still struggle to access credit in the face of excessively high interest rates and sky-high inflation in the coming time.”

“Thus, there are many factors that make businesses and people really uncomfortable, while the current reliefs are o­nly for immediate effects.”

Regarding some experts’ suggestions that when the aid package is submitted to the NA for final approval, the NA should ask the government to consider more effective solutions, Lan said she too hoped the NA could pressure the government to offer more adequate support to the businesses to help them overcome the difficult times.

Compared to the VND100 trillion excess tax revenue in 2011, the VND9 trillion tax breaks offered to local enterprises, which will result in the same loss for the state budget in 2012, the amount is just a dwarf, Lan said.

In recent years, the budget gets an estimated VND100 trillion tax revenue surplus per year.

There is still ample room for stronger relief packages that the NA should consider.

“The NA is responsible for making tax policies, so I sincerely hope they will propose and pass a CIT reduction of 20 percent in the coming session.”

After the Government announced the aid package, the Ministry of Finance said hundreds of thousands of businesses will benefit from the package regardless of the conditions of their “health.”

Regarding the VAT deferral, Vu Nhu Thang, director of the Institute of Financial Strategies and Policies, emphasized that about 400,000 enterprises, mostly SMEs, labor-intensive enterprises, and those operating in the lottery business, real estate, securities, finance, banking, and insurance, will enjoy the tax breaks.

The Ministry of Finance has calculated some VND4.1 trillion VAT will be delayed every month, so companies will have more working capital for business.

Besides, a series of measures, including tax deferral, reduction and exemption, accelerated disbursement of VND180 trillion of investment capital for business development from the state budget plus VND45 trillion of Government bonds in 2012 will boost the demand for stockpiling products, such as iron, steel, and cement.


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