Tax Reform Is Inevitable

In recent years, the taxation sector has ceaselessly built and improved taxation policies to lay legal foundation for the mobilisation of needed resources to serve the socio-economic development plan. The policy system has encouraged investment and export, stabilised business and production, boosted the economic structure shift, protected domestic production, and actively integrated into the international economy. The tax reform is gradually conducted in the direction of simplification, clarification and transparency to reduce troubles, create favourable conditions and reduce costs for both taxpayers and tax collectors, and gradually limit and eradicate the dark side in tax management.

 

To develop a synchronous tax management apparatus nationwide, the organisation machinery of the taxation sector is increasingly improved and intensified in all sides. The tax management is strengthened and the propaganda and support to taxpayers have gradually increased to raise self-conscious observance of taxpayers in tax payment duties. The investigation and examination are appreciated to timely discover and settle tax frauds, tax evasions and tax appropriations as well as restrict State Budget losses and guarantee the law obedience and social equity.

 

From 1991 to 2000, the tax and fee averagely increased over 10 per cent a year. Especially between 2001 and 2005, tax and fee collection reached VND780,000 billion (US$48.75 billion), doubling the amount in the 1996-2000 period. From 2003 to 2005, the average annual growth rate was over 20 per cent. The State Budget collection exceeded the task assigned by the National Assembly.

 

The tax and fee mobilisation ratio against GDP was averagely 21.1 per cent in the 1991-2000 period and 22.5 per cent (the target is 18-19 per cent) in the 2001-2005 period. The tax and fee collection became the main income of the State Budget (the tax and fee contributed 76.78 per cent to the State Budget in 1990 and 95.7 per cent in 2005). Hence, the tax and fee collection not only ensure regular expenditures but also increase investments for development and pay foreign debts. Overspending of the State Budget has been restrained at the accepted level. The State Budget is also able to deal with sudden socio-economic circumstances, contributing to the healthy development of the national financial market.

 

In spite of attaining important achievements, the system also exposed basic shortcomings in the industrialisation and modernisation period and international economic integration process. The tax policy system is still asynchronous, complicated and coupled with many social policies. The tax management has a lot of shortcomings in management regime, management technique, organisation and personnel. To overcome these weaknesses to meet the new requirements, the continuation of tax reform is a must.

 

From the incentive policy of the State and Party, each year, Vietnam has dozen thousands of new enterprises of all economic sectors. By 2010, Vietnam is estimated to have some 500,000 enterprises, over 1.5 million individual business households, over 11 farming households and 10 million households paying housing taxes. When the Personal Income Tax Law takes effect, million of people will join the taxpaying force. Further, the enterprise size is also increasing. The application of IT and high tech will be more popular. Hence, if the taxation sector is slow at reform, it will fail to meet the demanding requirements of enterprises. Meanwhile, the integration, the regional economic union and globalisation of the economy are inevitable and this requires a tax management mechanism in accordance with the world standard.

 

The overall target of the tax reform until 2010 is to build a synchronous tax policy system suitable with the socialism-oriented market economy in association with modernisation of tax management to mobilise financial resources to serve the national industrialisation and modernisation, contributing to the social equality and actively integrating to the world economy. The taxation sector will improve tax management level of Vietnam to regional countries, including management regime, management method, organisation and personnel.

 

The reform and modernisation of the tax sector until 2010 is an overall, deep and reform. The thoroughness and completeness can be seen in the reform of tax policy system and tax management. The tax management reform covers management regime, management method, organisation and personnel. This reform not only affects taxpayers and taxation agencies but also the entire community.

 

The deepness and thoroughness can also be seen in the definition of taxpayers’ responsibilities in self-declaration, self-calculation and self-payment, etc. This requires taxpayers to have a full command of tax policies and tax administrative procedures, thus, to self-consciously obey tax duties. Tax collection agencies must improve quality of its activities and supportive services, renew management processes in the mechanism of “self-declaration, self-calculation and self-payment”, apply advanced science and technology, and improve modern tax management skill and professionalism of its tax authorities.

By 2010, the tax and fee collection increased averagely 20-21 per cent a year. The avearage annual State Budget collection growth rate is over 10 per cent.