08:00 | 17/10/2020 Economy
The Government's 30 percent corporate income tax cut was a step in the right direction but it could have been more inclusive by offering support to small businesses that were in desperate need of cash due to the difficulties caused by the COVID-19 pandemic, said business leaders and industry experts.
|Workers at a textile factory in HCM City. There has been a sharp fall in demand for Vietnamese textile products in traditionally large markets such as the EU and the US, with the number of orders reduced by half in the last quarter of 2020 — VNA Photo|
The tax cut, signed into effect on September 25 for businesses with revenue under VNĐ200 billion (US$8.8 million) in the 2020 financial year, has been widely welcomed by the business community.
In a recent survey conducted by HCM City's Business Association, 84 percent of the city's businesses said they had experienced difficulties due to falling market demand, disrupted supply or lack of cash.
Đỗ Phước Tống, chairman of Duy Khanh Engineering Co. Ltd, said the tax cut had offered huge relief to small-and-medium-sized enterprises (SMEs), including those in the electrical and electronics industries.
Despite not being hit as hard by the pandemic as the tourism and service industries, Tống said his firm was hit by a sharp fall in demand in the domestic market, and a disrupted supply chain that resulted in numerous orders being cancelled. By his estimation, the industry suffered a 10-20 percent income decline in the first nine months of the year compared to the same period last year.
"A large number of businesses are having difficulty maintaining cashflow. The tax cut will be a tremendous help in keeping their operations alive and for paying workers," he said.
Phạm Văn Việt, vice chairman of HCM City's Textile and Garment-Embroidery Association, said the tax cut should apply to all businesses. The association also called for a reduction in value-added tax from 10 percent to 5 percent in a bid to support businesses across the country.
Việt cited a sharp fall in demand for Vietnamese textile products in traditionally large markets such as the EU and the US, with the number of orders reduced by half in the last quarter of 2020. Even the price for protective equipment and masks had seen a sharp dive as global supply had been steadily on the rise.
For the tourism industry, however, the tax cut didn't offer much as most businesses had been without income since March this year, according to Trần Đoàn Thế Duy, CEO of Vietravel, one of the country's largest tour operators.
"There is no income this year so the tax cut was not of much help. What we really need is the Government to give us more time to pay taxes and land use fees," said Duy. "For example, extending the deadline until June next year instead of by the end of this year. We could really use the cash to keep our businesses running."