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Private sector the largest taxpayer
Ngoc Lan
Wednesday,  Feb 7, 2018,22:35 (GMT+7)

Private sector the largest taxpayer

Ngoc Lan

HANOI – Financial figures, job creation and budget contributions as shown in a recent report on business development of the General Statistics Office (GSO) have indicated the strong growth of the private sector.

Despite small profits generated in 2016, private enterprises paid the largest tax sum with VND434.7 trillion in 2010-2016, much higher than State-owned enterprises (SOEs) and foreign direct investment (FDI) companies. In particular, payments to the State budget by SOEs were some VND277.3 trillion, and FDI businesses paid the lowest, at VND250.9 trillion, in the period.

SOEs are no longer the biggest contributor to the State budget. Such figures also mirror a questionable fact that FDI businesses are not paying high taxes due to tax incentives, whereas private businesses always have to pay full taxes.

With regard to profits, the FDI sector took the lead, accounting for 45.9% of the total amount of all enterprises in 2016. The respective proportions of the private and State sectors were 26.4% and 27.7%.

The bigger role of the private sector is also shown in the attraction of capital for production and business activities in 2010-2016. As of the end of 2016, private enterprises attracted VND16,750 trillion, representing 55.5% of capital of all enterprises.

Though SOEs saw a steady decline in number, their capital attraction was still high with VND8,360 trillion, or 27.7%. Meanwhile, the FDI sector attracted the lowest value, VND5,010 trillion.

In addition, in terms of job creation, SOEs accounted for some 9% of the workforce, private enterprises up to 61% and FDI enterprises around 30%. While the private and FDI sectors saw their payrolls rising 6.2% and 11.5% respectively, a drop of 4.2% per year was recorded in SOEs.

With equitization at SOEs making progress, the number of operational SOEs as of the end of 2016 was 2,663 units. The State sector recorded a decline of 3.4% per year in the number of enterprises in 2010-2016, whereas the non-State and FDI sectors posted an average increase of 10% a year.

Though the number of SOEs is falling, such enterprises are of big scale and still dominating major areas of the economy like oil and gas exploitation, electricity, chemicals and coal.

While domestic enterprises pay 20-30% in corporate income tax on average, FDI enterprises enjoy a lot of incentives. Small budget contribution amounts of the FDI sector result from FDI attraction policies, rather than capacities of such enterprises.

News website Dan Tri quoted Pham Dinh Thuy, head of industrial statistics at GSO, as saying that besides preferential corporate income tax, FDI enterprises active in high technology are exempted from import tariffs on spare parts and components. Some localities also offer tax reductions.

According to Thuy, the Ministry of Investment and Planning was previously in charge of licensing FDI projects, but now such power has been delegated to local governments. As a result, provinces and cities have different preferential policies on FDI attraction.

Therefore, it is essential to tighten the management of FDI attraction policies, ensure localities offer what they are permitted to, and create a healthy business environment for domestic enterprises, Thuy said.

Besides, there exist a number of FDI enterprises with transfer pricing, value added tax evasion and reports of low profits. The Ministry of Finance has been assigned to build a decree on transfer pricing prevention to create a level playing field for all stakeholders.

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