Int'l Integration Likely to Create Big Pressure on State Budget

 

Talking with the Saigon Economic Times, Quach Duc Phap, head of the Taxation Policy Department, the Ministry of Finance, said that rapid fall of budget revenues would be a big concern for the Vietnamese financial sector after the country joined WTO.

 

The State budget depends much on three revenue sources: import and export, accounting for 25 per cent; crude oil export, 25 per cent; and domestic sources (50 per cent). However, the third source has gradually reduced due to adjusted tax policies for the implementation of WTO commitments.

 

The financial sector estimates that budget revenues will be cut by around US$308.9 million due to import tax cut in five years after Vietnam’s accession to WTO. The figure is equal to VND 4,800 billion, or Vietnam will see a cut of around VND 1,000 billion in budget revenues, or equal to between six and ten per cent of annual tax revenues.

In addition, the concern doubles when the Vietnam’s budget will suffer a huger loss resulting from a tariff cut and the country’s participation in free trade areas in comparison with other countries with the same condition with Vietnam (25 per cent for Vietnam and 13 per cent for other countries). At the same time, revenues from the State-owned sector will be impacted significantly.

 

At a recent conference of the financial sector, the Ministry of Finance said that budget revenues in the first half were equal to just 48.8 per cent of the yearly plan. This figure was 53.3 per cent in 2005 and 54.6 per cent in 2004. By June 30, 2006, domestic tax debts and tax fine debts had reached around VND 3,600 billion. Of the figure, VND 1,420 billion cannot be collected. Meanwhile, import and export tax debts reached VND 2,700 billion, of which VND 800 billion cannot be collected.

 

Meanwhile, the Ministry of Finance has submitted the Government estimated State budget revenues for 2007. Accordingly, Vietnam will strive to have its budget revenues reaching over 22 per cent of GDP.

 

In the final half of this year, according to Deputy Prime Minister Nguyen Sinh Hung, the budget task is very heavy as GDP will have to gain a growth rate of 8.6 per cent in the final half while capital construction investment has been disbursed by 34 per cent of the estimated figure.

 

Minister of Finance Vu Van Ninh said the Government would issue a programme to perfect taxation reform. Accordingly, tax revenues may decrease but taxable subjects and the management capability will certainly increase. The Ministry of Finance will follow closely main revenue sources, including import and export, retail sales, production and business activities, and to promote revenues from the private sector, incomes from land and houses, and fees.

 

The sector will promote the examination of enterprises which deliberately declare low income tax or losses to avoid tax payment. “In corporate finance, the State will manage enterprises with laws, not allocating capital directly to enterprises and shifting from administrative management to using shareholder rights via the State Capital Business and Investment Corporation,” said a leader of the Corporate Finance Department, the Ministry of Finance.

 

More importantly, however, according to Nguyen Van Ninh, head of the General Department of Taxation, it is necessary to remove troubles caused by taxation officers to taxpayers. In a draft law on tax management, which was recently submitted to the Government, the Ministry of Finance clarifies obligations and powers of taxpayers, tax officers.