A proposal to make all advertising costs tax-deductible has received high praise from Vietnam's struggling business community.
The country's Corporate Tax Law currently allows businesses to deduct 15 percent of their advertising expenditures as a cost of doing business.
The nation's corporate income tax rate is now 22 percent, a rate many consider too high given the number of businesses struggling to survive.
The Ministry of Finance will present a list of tax relief measures during a parliamentary session this October, including a bill that will allow business to deduct all advertising expenditures as a cost of doing business.
On September 11, the ministry released the draft bills, which noted that most countries allow businesses to deduct advertising costs from their taxes.
Pham Dinh Thi, director of the ministry’s Tax Policy Department, said they are weighing two options: removing the cap completely or removing the cap on in-house marketing budgets while continuing to limit deductions on the costs of physical ads.
Some members of the National Assembly -- Vietnam's legislature -- can't wait until the plan is officially presented.
“We should scrap the cap right now,” said Vu Tien Loc, chairman of Vietnam Chamber of Commerce and Industry who is also a lawmaker.
Loc said the Prime Minister has ordered all necessary measures be taken to save businesses, including bold moves like removing the cap.
“Advertising is a normal part of doing business and firms have the right to take out ads whenever they see fit as long as the activities do not violate the laws or stymie healthy competition,” he said.
Vu Viet Ngoan, chairman of the National Financial Supervisory Commission, called the decision “very good news for the business community.”
Ngoan said the ministry is finally taking steps to provide much-needed relief.
He said it’s time to remove tax restrictions and the ministry should be confident in making all advertising costs tax-deductible.
“I know the ministry worries that businesses may overspend more on advertising to hide profits and skim on taxes," Ngoan said. "But I'm confident that won't happen. The ministry will probably collect more taxes thanks to rising sales."
Mai Huu Tin, chairman of the Vietnam Young Business Association, said it would be unreasonable to assume businesses would sabotage their own profits just to dodge taxes.
“Advertising expenses are meant to help them survive, compete, expand their market segment and increase their profits,” Tin said.
Tran Hung, vice chairman and general secretary of the Vietnam Advertising Association, said if the ministry wants to help, it should remove the cap completely.
“Imposing it will reduce businesses’ capacity to compete,” he said.