Vietnam has announced plans to simplify its tax payment procedures as part of a larger effort to improve its business climax, which the World Bank ranked 99th out of 189 countries worldwide.
Vietnam hopes to cut the average amount of time businesses spend doing taxes to 354 hours late this year, and 171 hours next year, said Deputy Minister of Finance Do Hoang Anh Tuan.
The ministry is polling opinions from provinces, ministries, enterprises and the World Bank on amending its procedures for paying personal income tax, corporate income tax and value-added tax, he said at a recent business conference.
Under the new plan, the ministry will allow enterprises to declare and submit corporate tax payments once a year, instead of quarterly.
It is also considering allowing enterprises with annual revenues of VND20-50 billion (which includes 96 percent of firms nationwide) to declare and submit their value-added tax payments every three months.
Under current protocols, only firms with annual revenues below VND20 billion (US$952,000) are allowed to declare and submit value-added tax payments every three months--others do so every month.
Vietnam has made progress in reforming its tax procedures in recent years, but it still has a long way to go in order to match regional neighbors like Malaysia and Thailand.
The World Bank’s 2014 report on Vietnam's business environment said businesses here declare and submit taxes 32 times a year. The procedures require an average of 872 hours to complete--or 100 working days.
Meanwhile, in other Asia-Pacific countries, tax paperwork takes businesses an average of 208 hours a year to complete.
To complete tax payment procedures, firms in Vietnam have to fill out stacks of redundant forms and submit them to various agencies. Frequent transactions between enterprises and state officials may raise the risk of corruption, said Olin McGill, a senior economist for the United States Agency for International Development (USAID).
McGill estimates that simplifying its procedures will minimize the risk of corruption and the cost of doing business in Vietnam.
Businesses currently spend some VND8 trillion (US$380 million) on paying Vietnam's many accountants; McGill estimates that if tax preparation time falls to 171 hours per year, accounting expenses could fall to VND6.6 trillion (US$314.3).
Firms now spend 21 days to prepare documentation for import or export activities, while the respective duration in Malaysia and Thailand are 11 and 14, he said.
If the time to complete the procedures falls by 14 days for export activities and by 16 days for imports, McGill calculates that Vietnam’s GDP will rise by 28 percent, and total international trade revenues will increase by 50 percent, he said, so long as firms re-invest their savings into production and improving product quality.
Without improving its business environment, Vietnam’s economic development won't keep pace with that of developed countries, said Nguyen Dinh Cung, director of the Central Institute for Economic Management.
It will take decades for Vietnam’s economy to fully develop if it continues to grow at an annual economic growth of 7-8 percent, he added. The country is projected to reach GDP growth of 5.5 percent this year.