MOF suggests forgiving businesses’ tax debts

VietNamNet Bridge – The Ministry of Finance (MOF) has proposed to absolve tax payments for businesses that have had financial difficulties over the last five years. The total amount could reach VND4.8 trillion.

Vietnam, tax, bad debts

MOF has asked the government to submit to the National Assembly a plan to forgive the businesses’ tax debts and their fines for tax-payment delays.

The forgiveness would be offered to debts before July 1, 2013 and to businesses which have paid principal tax debt before December 31, 2014.

According to the ministry, from 2008-2013, many businesses had difficulties due to the recession and could not pay taxes on schedule.

Under current laws, fines of 0.05 percent per day, or 18.3 percent per annum, for tax payment delays, are imposed.

However, MOF thinks that heavy fines on the taxpayers would increase the burden on businesses. It would be even more difficult for businesses to access bank loans if they are fined for tax payment delays.

Meanwhile, the ministry believes that the businesses’ slow sales and high inventories were caused by problems of the national economy, including a high inflation rate and banks’ high lending interest rates.

Many small businesses had to borrow capital from banks at the high interest rate of over 20 percent.

Tax officers have found that in many cases, the fines businesses had to pay for tax payment delays far exceeded the original tax sums.

They warned that if there was no reasonable solution to the problem, tax arrears and the fines for tax payment delays would increase. If so, more and more businesses would be pushed against the wall or be at the brink of bankruptcy.

A report from the General Department of Taxation showed that unpaid tax debts have been increasing rapidly.

By the end of 2013, the tax debts had reached VND60.919 trillion, up by 10.64 percent over 2012. Meanwhile, the figure had climbed to VND68 trillion by the end of May 2014.

Businesses need to meet one of three criteria to be eligible for tax forgiveness.

Enterprises that provide goods and services to state-funded projects, but cannot pay tax debts because their users have not paid them for the goods or services, are eligible for tax forgiveness.

Or, they can be enterprises unable to pay debts because their partners went bankrupt or broke business contracts.

Businesses which had to borrow capital from banks at a rate of over 20 percent per annum, with total unpaid tax debts equal to 100 percent of the tax sums or higher, would also be eligible.  

Pham Huyen

Vietnam, tax, bad debts