LookAtVietnam Bridge – The National Assembly discussed ways to collect tax from goods and services that are not included in the Value Added Tax Law yesterday.

Workers at the HCM City-based KOVA paint company run automatic paint production lines. Corporate income tax is drafted to lower to 25% from 28%.

They also discussed lowering the Corporate Income Tax from 28 to 25% to foster domestic competitiveness and foreign investment.

Goods and services exempt from VAT; the formula for calculating VAT and eligible deductions and eligibility for refunds were the focus of the debate.

Twenty eight commodities and services are now Value-Added-Tax exempt and the draft law proposes rolling its existing three categories into one as a way of eliminating loopholes.

The proposed law would guarantee VAT for:

Imported machines that are designated as fixed assets and materials that cannot be made in Vietnam and which serve in the creation of goods and services used for international transport; cultural, sports and exhibitions; artistic performance; the production of films and their importation and distribution as well as geology, including surveys and map making; and VAT- exempt financial derivatives.

Most deputies agreed that goods and services subject to VAT should be widened and that monitoring ensure that the tax for all eligible categories is collected.

Tran Hong Viet, southern Hau Giang Province, said health insurance should be VAT exempt.

Other deputies said unprocessed minerals should also be VAT exempt but Tran Hong Viet argued that a five-per cent tax was necessary to ensure the country’s natural resources were not over exploited.

The proposed changes would only shift categories of goods and services between the three VAT rates of zero, 5 and 10 per cent.

But Pham Thi Loan, Hanoi, suggested a single rate of 10%.

Enterprises that were in theory VAT free were now liable when they bought materials, she said.

The variable meant that some times enterprises lost and sometimes the State lost, she said.

The deputies agreed to set rules for the tax office to refund VAT via the banking system.

The rules were essential to restrict individuals and companies from using forged invoices and documents for refunds.

Corporate Tax

The deputies discussed the Government’s proposal to reduce the Corporate Income Tax from 28% to 25% during the afternoon.

Most agreed with the proposal and said that it would provide businesses the chance to increase their accumulation and enhance their power and competitive capacity in the region.

It would also attract international investment.

But some deputies worried that the lower tax rate would be cost the Government between VND5tril to VND7tril each year.

Pham Thi Loan, Hanoi, asked the Government to first study the consequences of the proposed change to ensure it maximises the benefits to business.

Phuong Huu Viet, northern Bac Ninh Province, said that when the Government lowered the corporate tax from 32 to 28% in 2003 it had not altered revenue collection.

It was 17% then and the same now.

Higher revenue stemmed from the increase of businesses from 100,000 in 2003 to 300,000 last year.

The proposed three per cent reduction in corporate tax was meagre against Singapore’s rate of 19% and 17.5% in Hong Kong.

The deputy suggested that the reduction should be to 20% rather than the proposed 25%.

Pham Thi Loan, Hanoi, agreed.

The deputy suggested a progressive tax would minimise super profits and narrow the gap between rich and poor enterprises.

Enterprises would not avoid a 20-per cent tax, she said.

Most deputies disagreed with the proposed regulation regarding trade promotion and securing of trademarks and copyright.

Nguyen Thi My Huong, Da Nang, said an enterprise should be allowed to decide its promotional spending and then calculate the corporate tax. The law should not set different limits for small and big enterprises.

Deputy Tran Van Doan, southern Ca Mau Province, said such draft law would not protect small to medium-sized businesses.

(Source: Viet Nam News)