The Finance Ministry has proposed relieving struggling businesses from a huge amount of tax debts to stem a rising tide of shutdowns and bankruptcy filings.
Bui Van Nam, director of the General Department of Taxation, said unpaid taxes and overdue tax penalties rose to more than VND60.9 trillion (US$2.88 billion) by the end of December 2013--a 10.64 percent increase year-on-year.
The arrears had climbed a further VND7.5 trillion by the end of May.
On Thursday, an unidentified ministry official told Tuoi Tre that around VND6.54 trillion ($308.41 million) of taxes and penalties are expected to be cleared.
“In many cases, penalties for late tax payments have surpassed the taxes themselves… putting more pressure on the tax payers,” the official said.
Penalties for overdue taxes hit 9.75 trillion by July 2013--15 percent of all owed tax money. Private firms owe 62 percent of all tax penalties.
The ministry reported that the situation for local businesses hasn't really improved. Most have been troubled for years by stagnant production and a complete inability to expand.
Figures show 18,271 business shut down during the first five months of this year and 50,263 businesses suspended their operations during the same period.
The government thus has ordered the ministry, and specifically the tax department, to study possible solutions.
Nam said he is talking with relevant ministries and business associations about clearing tax and penalty debts that stretch back so far they can hardly be considered recoverable and possibly freezing other tax debts.
Exemptions and delays will help firms focus on maintaining production and creating jobs, according to Cao Si Kiem, chairman of the Association of Small and Medium Enterprises, which represents 90 businesses in Vietnam.
The ministry also plans to ask the government to approve deadline extensions on value-added taxes for imported goods used in state-funded projects, which have suffered from slow disbursements from a troubled government budget.
The ministry will also consider supporting investors in new industrial projects with tax breaks during the first two years and 50 percent tax cuts over the subsequent four years.
To encourage investments from South Korea and Japan, the ministry suggested that the government allow high-tech projects and those worth at least VND6 trillion to continue to pay taxes of 10 percent for 30 years instead of 15 years. Vietnam currently charges a common corporate income tax of 22 percent, down from 25 percent last year.