Businesses made a strong push for a plan to make all advertising tax-deductible during a recent meeting in Hanoi.
Participants at the Vietnam Retailers Association conference threw unanimous support behind the plan.
Some even criticized the government for taking so long “to do the right thing.”
Doan Manh Tien, chairman of Vietnam's Association of Corporate Directors, said: “Everyone knows that this restriction must be eliminated, but [the government] has continued to insist on it for so many years.”
“I think they were keeping [the small deductible on advertising] to say ‘we have the power,’ which is very harmful,” Tien said.
He said the ministry's proposal has created some light at the end of the tunnel -- “a small but meaningful beam of light,” he noted.
The country’s Corporate Tax Law currently allows businesses to deduct a maximum 15 percent of their advertising expenditures as a cost of doing business.
On September 11, the Ministry of Finance released draft bills, which noted that most countries allow businesses to deduct all advertising costs from their taxes.
The ministry said it will include the removal of the ad deductible on a list of tax relief measures during a parliamentary session this October.
The limit on advertising deductions was introduced after foreign giants like Coca-Cola listed huge advertising costs to claim losses and enjoy tax breaks.
But Nguyen Thi Thanh Ha, deputy secretary of the Vietnam Advertising Association, said the restriction only hurt local firms.
Most foreign companies arriving in Vietnam have already established their brand names, he said.
Vietnamese businesses, most of them small and medium-size, have struggled to survive amid a corporate income tax rate of 22 percent.
Le Ba Co of the Vietnam Beer and Beverages Association, said the restriction violates global norms and Vietnam should not play by its own rules on the world stage.
Co dismissed the ad deductible as “rigid” at a time when business plans should be increasingly flexible.
"Everyone knows that this restriction must be eliminated, but [the government] has continued to insist on it for so many years.”
-- Doan Manh Tien, chairman of the Vietnam Association of Corporate Directors, on the 15 percent deductible cap on ad expenditures.
A company can spend 5 percent of their total budget on advertising in one year, but 20-30 percent another year, Co said.
The limit “doesn’t give businesses much of a foundation on which to build their brand and increase their competitiveness.”
Pham Thanh Minh, general secretary of the Hanoi Advertising Association, said the rate has discouraged people from spending on advertisement and stymied the growth of the advertising sector.
Minh said he understands that the rate is designed to prevent businesses from making “unclear” claims about advertisement costs, but the government should address that problem by auditing problem businesses.
“You cannot punish all businesses equally just because some don't play fair.”
The participants’ opinions will be collected and sent to the government and related house committees in an effort to bolster the proposed elimination of the cap during the scheduled legislative session in October.
Pham Thi Thu Hang, general secretary of the Vietnam Chamber of Commerce and Industry, told Thanh Nien her office has collected more than 300 business endorsements for the elimination of the deductible cap.
“I personally think it’s not necessary or normal. Vietnam is integrating. Its businesses need to invest in building brands and promoting their images to the world.”