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FDI firms make small tax contributions despite plentiful incentives
The Saigon Times Daily
Thursday,  Jun 21, 2018,18:18 (GMT+7)

FDI firms make small tax contributions despite plentiful incentives

The Saigon Times Daily

HCMC – Although foreign direct investment (FDI) enterprises are receiving more investment incentives than domestic businesses, tax payments by the FDI sector are much lower, the 2018 Vietnam Business Development Forum heard in Hanoi on June 19.

Speaking at the event, Dau Anh Tuan, head of the Legal Department at the Vietnam Chamber of Commerce and Industry (VCCI), noted that Vietnamese private enterprises are weak and of small scale and the proportion of profit-making enterprises is low. In addition, private businesses have little exposure to the global market.

Meanwhile, FDI enterprises are experiencing simpler business conditions, have better access to resources and are given more care.

However, according to Tuan, combined tax payments by private enterprises make up 43.82% of the total, whereas FDI firms account for only 25.28%.

Tuan said the domestic private sector needs equal care and should enjoy better policies in the coming period to grow stronger. Domestic enterprises are, after all, the pillar of the economy, he added.

Sharing this view, Vice President of the Central Institute for Economic Management (CIEM) Phan Duc Hieu said that bolstering the private economic sector in terms of both size and quality is a major driving force for economic development.

According to Hieu, Vietnam’s reform efforts are facing challenges with reducing the cost burden and with business conditions.

Regarding the government’s target to have one million enterprises in place by 2020, Dr. Vo Tri Thanh, president of the Institute for Brand and Competitiveness Strategy, noted it seemed to be out of reach. No significant change to the business environment in the past few years has been recorded, he added. 

According to Thanh, there is not much time left until 2020 arrives. Further, this year’s first half has already seen many enterprises suspending operations for a wide range of reasons.

According to Dr. Tran Thi Hong Minh, director of the Business Registration Management Agency under the Ministry of Planning and Investment, domestic enterprises have made some progress over the past three years, showing increases in business registration and exports. Nonetheless, to attain the targets set by the government, more efforts are needed and the business environment needs to be improved further.

Among the 127,000 new enterprises that registered last year, 87% is still operational. If the business environment and conditions are improved, enterprises can operate more effectively, Minh stated.

Data from the General Statistics Office showed that 41,295 enterprises were set up in January-April, with total registered capital of VND412 trillion, up 4.3% in the number of enterprises and up 11.5% in capital volume against the same period a year earlier. Registered capital of a single enterprise averaged some VND10 billion, a year-on-year rise of 6.8%.

With VND749 trillion from almost 12,200 enterprises with capital adjustments included, VND1.161 trillion was added to the economy in the year’s first four months.

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