Tax incentives have been one of the key elements in Vietnam's tax policy since the reforms and the opening of the economy. However, tax incentives in our country are still interwoven with "bright areas" and "dark areas", requiring master planning in the shortest time.

Policy of personal income tax incentives in our country has contributed to
attracting investment and promoting economic growth. Photo: N. Thanh 

Incentives to attract investment

The forms of tax incentives in Vietnam are quite diverse, including corporate income tax (CIT) incentives; preferential tax exemption and CIT reduction period; incentives for land rent and water surface rent exemption or reduction; tax exemption for non-agricultural land use; exemption of export tax, import tax.

Quang Ninh is one of the localities using very effective CIT incentives. Recently, this province has implemented many new preferential policies issued by the Government and the National Assembly; at the same time, it has its own policies to contribute to attracting investment resources both at home and abroad, contributing to the socio-economic development of the province in particular and of the country in general.

According to the report of the Quang Ninh Tax Department, in the 2016-2020 period, the Tax Department of Quang Ninh province has consulted on investment incentive policies for more than 380 sets of dossiers applying for investment registration certificates; implementation of tax exemption and reduction for 177,498 sets of dossiers with the total amount of more than VND2,837 billion.

According to this unit, the application of incentives has many positive impacts on the economy of Quang Ninh province, such as attracting more resources for socio-economic development, helping Quang Ninh province become an attractive destination for foreign investors; at the same time promote the process of economic restructuring, including the structure of sectors, fields, and regions; increase exports and promote the restructuring of exports to processing and manufacturing industries.

In Hai Duong province, the report of Hai Duong Tax Department shows that in the 2016-2020 period, this unit has implemented tax incentives totalling more than VND1,820 billion. According to the provisions of the tax administration law, at present, the procedures for implementing CIT incentives are because enterprises determine the conditions for tax incentives to self-declare and finalize tax with the tax authorities.

Simplify administrative procedures, save time and compliance costs, and create favorable conditions for taxpayers.

Still inadequate

According to Assoc, Dr. Vương Thị Thu Hiền a Lecturer at the Academy of Finance, CIT incentive policy through the reduction of tax obligations, reduction of basic tax rates and increased incentives to exempt and reduce corporate income tax and land rent for a number of fields and areas operating under the direction of the State have helped organizations and individuals across all economic sectors have conditions to rapidly increase capital accumulation, expand production, and promote economic growth at a high speed.

"According to the provisions of the Law on Corporate Income Tax, CIT incentives are only applied to eligible business establishments, tax incentives, full implementation of accounting, invoices and documents of tax registration and tax payment according to declaration, this has contributed to promoting enterprises to strictly comply with regulations on accounting and tax administration," Assoc.Prof. Dr. Vuong Thi Thu Hien said.

However, at present, the tax incentives are quite high, and the incentives are still widespread, reducing the state budget revenue. According to the Quang Ninh Tax Department, the list of industries, occupations, fields and areas enjoying tax incentives in this province is quite wide. This practice has reduced the "orientation" role of tax incentives in the realization of socio-economic development goals. At the same time, the wide incentive range means a high cost of applying tax incentives, especially for the state budget revenue.

Hai Duong Tax Department also pointed out the situation in this locality. In recent years, FDI enterprises have benefited the most from tax incentives. Meanwhile, the accessibility of domestic enterprises is still limited, especially small and medium enterprises, accounting for a large number of the total number of businesses in the area.

Although in 2017, the Law on Support for Small and Medium Enterprises stated that "small and medium enterprises can be applied with a CIT rate lower than the normal tax rate applied to enterprises as prescribed by law on corporate income tax", however, to date, there has been no specific document to guide how much the tax is.

This makes the issue of tax incentives still inadequate, requiring further changes so that these policies really become a driving force for business development as well as the economy.