Policy Recommendations

Building a taxable income threshold to identify SMEs

Revenue is the criterium to determine whether SMEs are eligible for tax incentives. Enterprises with a turnover of 20 billion VND or less will enjoy a preferential tax rate of 20% (the common tax rate is 22%). However, each industry has a different rate of profit, so such a calculation on revenue will lead to an imbalance in the actual resources that businesses benefit from this tax incentive.

To overcome this problem, it is proposed to apply a taxable income threshold based on the actual income (profit earned) of the business instead of revenue. In addition, the use of progressive tax rates can be considered to help automatically regulate the resources of enterprises. To ensure the number of businesses receiving incentives and encourage businesses, proceed to apply from 0-10 billion VND, enjoy 15% interest rate, from 10-20 billion VND, enjoy 17% as proposed by the Law on Support. SMEs. The figure of 10 billion VND will help expand the beneficiaries of tax incentives, but it will cause a large loss of state budget revenue. However, this tax spending will be considered as an investment capital for development of the economy, and according to the multiplier model, it will help increase output for the economy. The difference between the two tax rates of 15% and 17% is not too large, will not cause the psychology of tax avoidance of businesses with incomes over 10 billion. Businesses are not afraid of increasing their business size for fear of having to pay a lot of taxes. The division of these two tax rates, although reducing revenue for the state budget, but in the context that businesses, especially SMEs, are heavily affected by Covid-19 will have the motivation to restore production activities to generate more revenue. added value to the economy.

Special incentives for newly established SMEs

CIT incentives focus on many priority localities and industries but lack incentives for newly established SMEs. Newly established businesses are subject to many difficulties, especially financial difficulties. In the current Covid-19 context, the number of bankrupt businesses is relatively large, especially small and medium-sized enterprises. To revive businesses in the coming time, the author proposes to apply CIT exemption for newly established businesses in the first 2 years with income not exceeding 20 billion VND. This regulation will create conditions for newly established enterprises to accumulate more capital for the development of production and business activities. To avoid the situation where many enterprises make profit by shutting down their business operations, dissolving and then establishing new ones, tax administration agencies need to build a system to manage business information. In addition to information on the place of registration of production and business is also classified according to information about the owner and representative of the enterprise. It can ensure to minimize the loss of revenue due to businesses evading taxes.

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CIT incentives promote research and development activities in SMEs

Science and technology development is an inevitable trend of the economy. Promoting enterprises, especially SMEs in R&D, will spread the positive effect to other industries. Investment in technology development is capital intensive and the payback period is longer than in many commercial sectors. Therefore, the psychology of SMEs is quite hesitant to participate in this field. To ensure the mobilization of resources in the economy, the state needs to adjust incentives for this object. The study proposes to deduct 100% of actual expenses invested in scientific and technological research and development when calculating CIT. This regulation ensures that only enterprises that invest in R&D are eligible for incentives.

Accelerated depreciation for SMEs

In order to help SMEs turn capital quickly, improve production and business efficiency, it is necessary to have separate regulations on depreciation for these enterprises. Research proposes regulation allowing SMEs to depreciate 70% of machinery and equipment; measuring and testing tools; equipment and means of transport…. In the context of the rapid development of science and technology, businesses need to continuously invest in renewing machinery and equipment to improve productivity and meet the needs of the market. With the regulation of 70%, enterprises only need about 2 years to return their investment in fixed assets, speed up capital turnover, improve production and business efficiency; encourage enterprises using their capital to renew fixed assets for production and business activities.

REFERENCES

1. Anh Pham (2020), Effects of temporary corporate income tax cuts: Evidence from Vietnam, Journal of Development Economics, 146 (2020) 102467.

2. Duanjie Chen, Franck Lee and Jack M. Mintz (2002), Taxation, SMEs and Entrepreneurship, OECD Science, Technology and Industry Working Papers, OECD-ilibrary.

3. GSO, Statistical Year Books in severy years.

4. Ministry of Planning and Investment (2021), Vietnam White Paper 2021

5. Nam C. W. and Radulescu D. M. (2005). The Role of Tax Depreciation for Investment Decisions:

A Comparison of European Transition Countries, Eastern European Economics 43(5): 5–25 6. Nam C. W. and Radulescu D. M. (2006). Effects of Corporate Tax Reforms on SMEs’

Investment Decisions under the Particular Consideration of Inflation, Small Business Economics (29), 101-118 (2007)

7. Vietnam’s Government (2013), Decree No. 83/2013/NĐ-CP issued on 22/07/2013.\

MSc. Nguyen Tien Kien¹, MSc. Nguyen Chien Thang¹

Abstract: A sustainable tax, fee and fee structure is determined on the basis of a structural balance between indirect taxes (collected from consumption), direct taxes (collected from income) and taxes on assets. In Viet Nam, the sustainability of budget revenue is reflected in the revenue from taxes and fees, which contributed significantly to the total state budget revenue in the period 2016 - 2020. This article provides an overview of the results of tax system reform in the period 2016 - 2020, thereby identifying the risk factors affecting the process of organizing the implementation of state budget revenue and making recommendations for tax system reform by 2030 in order to achieve a sustainable budget revenue structure in the current context.

Keywords: tax reform, sustainable budget revenue, organize the collection of state budget

1. INTRODUCTION

Building, consolidating and maintaining the stability and sustainability of the State Budget is the goal of all countries in the world. Accordingly, “Budget sustainability is a state in which the State’s budget revenues and expenditures are actively controlled, ensuring the State’s ability to fulfill its financial obligations as committed.” [2] and when it comes to budget sustainability, revenue sustainability plays a particularly important role.

In Viet Nam, the sustainability of budget revenue is reflected in the revenue from taxes and fees contributing to the total state budget revenue. Since the beginning of 2000, it has been identified as the third phase (from 2021 to 2030) of the Tax System Reform Strategy (phase 1:

2001-2010; phase 2: 2011-2020), the state budget revenue for tax revenues (except crude oil) has had undeniable achievements, the sustainability has been significantly improved, reflected in the continuously increasing scale in both absolute numbers, as well as relative numbers in total state budget revenue and compared to GDP. However, the sustainability of state budget revenue for tax revenues in the past period is still affected by loopholes or gaps in tax policies, lack of seriousness of tax and fee collection discipline, leading to tax loss; tax evasion and inequality for the section that seriously fulfills the obligation to collect and pay the state budget. In addition, many “spaces”

for tax revenue in the economy have not been fully exploited, especially in the context of the development of the digital economy.

In the context of the deep integration of the economy along with the development of the digital economy, recent international tax reforms and the significant impacts of the recent Covid-19

1 Email: ntkien01@gdt.gov.vn

General Department of Taxation of Viet Nam

126 THE THIRD INTERNATIONAL CONFERENCE ON: “FINANCE AND ACCOUNTING FOR THE PROMOTION OF SUSTAINABLE...

pandemic has not yet ended; on the one hand, the Government is always determined to persevere in the implementation of the “dual goal” of fighting the epidemic and developing the economy, on the other hand, it must always pursue the goal of restructuring the state budget set out in Resolution 07-NQ/TW dated November 18, 2016 of the Politburo.

Thus, in the coming time, in order to structure state budget revenue in a sustainable direction to ensure growth in size and structure, the Government needs to continue to reform each tax in the direction of expanding the tax base and ensuring fairness, efficiency, simplicity, transparency; this is done through tax system reform in Strategy for the coming period. Stemming from the above issues, the research paper “Reforming the tax system to 2030 towards to a sustainable budget