Businesses don’t care about decision on tax payment delay

The Prime Minister has released a decision allowing small and medium enterprises (SMEs) to delay the 2011 corporate income tax payment by one year. However, what SMEs need now is not the right to delay the tax payment.

Businesses keep indifferent to tax payment preferences
Thoi bao Kinh te Saigon has quoted businesses as saying that the decision by the government to allow late tax payment should be seen as the “spiritual encouragement” in the difficult period, while it does not have much significance in reality. The businesses say the decision can be used as a “restorative”, while what businesses need now is an active remedy.

SMEs say that it is nearly impossible to make profits at this moment to pay corporate income tax. Since they cannot make profits, they do not have to pay tax and do not need to ask for the payment delay.

Tran Anh Huy, Director of Huy Phat Company, which specializes in doing the outsourcing of animal feed for multinational groups with the chartered capital of less than four billion dong and 10 workers, said that when businessmen meet each other these days, they always hear the question “Will you survive the difficulties?” instead of “How much will you earn this year?”

Huy said that SMEs have never before met such big difficulties like now: the input material prices have increased by 20 percent, the fuel price has increased by two folds, while enterprises have to raise the wages by 20-30 percent to retain workers.

“The problem is that we cannot raise the prices of our products in accordance with the input cost price increases. If we do, we may lose clients,” he complained. As a result, SMEs have to “clench their teeth and endure low profits”, trying to survive the current difficulties and hoping that the situation would be improved soon.

Also according to Huy, the profit his company expects has been lowered to less than 10 percent instead of 25-30 percent. No target about the profits has been set up for the company, and the tax payment delay has never been arisen in his mind.

Nguyen Tri Kien, Director of Miti, the company which specializes in making handbags, complained that it is very difficult to lease workshop premises nowadays. He said workshop premises with the area of 30 square meters now in Hanoi would cost 60-70 millions of dong a month. He admitted that he fears the targeted profit for 2011 would be out of reach. Therefore, the sum of corporate income tax his company has to pay would not be high. This means that the sum of money his company can use as working capital would not be considerable.

Deputy General Director of a farm produce import company said that in 2010, his company had to pay 500 million dong in corporate income tax. The targeted profit of the company for 2011 is just equal to 2/3 of that in 2010, which means that the tax sum it has to pay would be lower than 500 million dong. “The sum of money would be just a “small grain of salt in the sea”,” he said.

Nguyen Cong Tuan, Finance Director of Hancofood, said that his company may incur losses this year, and that it just dreams of breaking even in 2011. Therefore, the company will not have to pay tax. He said SMEs now have to think about where to seek capital and how to maintain production, not about the corporate income tax payment.

Who will be the beneficiaries?

Unlike 2009-2010, the number of SMEs to be eligible for the corporate income tax payment delay has been narrowed. The majority of state owned enterprises, and the SMEs which have income from real estate trade, securities, banking, insurance business, and the companies trading the imports which are not encouraged, also cannot enjoy the preferences.

The Ministry of Finance has estimated that some 200,000 enterprises out of 360,000 SMEs throughout the country will be the subjects of the new policy with the total tax sum of seven trillion dong.

However, in localities, the number of enterprises and the sums of delayed tax still has not been defined. A leader of the HCM City Taxation Department said that to date, he still cannot know for sure how many beneficial enterprises and the sums of tax.

Many enterprises said that they are not interested in tax payment delay because of the complicated procedures. Director of a farm produce import-export company said the taxation body lists her company as an SME eligible for tax payment delay, but tax inspectors believe it is not the right subject.-TBKTSG

Tags: Vietnam Tax