A woman rides a bicycle past uncompleted villas at a new urban zone in Hanoi July 9, 2012.
The government is considering a US$3.55 billion economic rescue plan in lowered taxes, land lease fees and interest rates to stimulate production and the property market, but target beneficiaries of the plan are none-too-thrilled.
The plan was announced at a two-day online meeting held this week between the central and local governments, where officials discussed budget spending in 2013 with a focus on kick-starting production and resolving the bad debt situation.
Deputy Prime Minister Hoang Trung Hai said at the meeting that the government would use around VND31 trillion ($1.5 billion) from the state budget so that businesses can delay payment of corporate income tax, value-added tax and land lease fees.
The VND31 trillion comprises environmental tax refunds, personal vehicle taxes not collected, reductions in registration fees for cars, reductions in land rent and other deductions.
The policy targets small and medium-sized businesses, labor-intensive companies employing more than 300 people and those trading or investing in housing, so that they can reduce their prices and stimulate consumption, he said.
It would allow businesses to delay paying corporate taxes of the first quarter for six months, and of the second and third quarter for three months. They can also delay paying VAT in the first quarter for six months.
A further VND3 trillion ($144 million) will be spent so that businesses can benefit from a reduction in corporate income tax.
The Ministry of Finance said in December it plans to cut corporate tax by 2 percentage points to 23 percent by 2014.
But under the rescue plan, Hai said, the government will propose to the National Assembly that the tax is further lowered to 20 percent starting July 2013 for small and medium-sized businesses, and to 10 percent for developers and traders of social housing projects for low-income buyers.
It will also suggest that VAT is halved for one year starting next July for investors in low-income housing, and by 30 percent for investors in apartments smaller than 70 square meters and cheaper than VND15 million ($720) a square meter.
The VND3 trillion outlay in the rescue package will also help cut land lease fees by half for businesses for the next two years, Hai said, adding the government also plans to instruct the State Bank of Vietnam to offer low-interest loans of between VND20-40 trillion ($0.96 - $1.92 billion) to defreeze the property market.
This will benefit property investors and low-income home seekers, and help construction material retailers clear their stock.
Commercial banks will receive the money and be instructed by the central bank to provide cheap loans of up to ten years to low-income earners, government and military workers who are seeking homes, as well as providers of affordable housing.
Hai also asked the central bank to prepare plans to set up the national asset management company by January to help clear bad debts.
He said the government plans to reduce interest rates in accordance with inflation and extend loan terms to support businesses in general, especially those in agriculture, small and medium-sized enterprises and manufacturers of export goods.
The rescue plan, if taking effect, will also boost business at automobile retailers as it will reduce the registration fee of cars smaller than ten seats to between 10 and 15 percent, compared to the current maximum fee of 20 percent, he said.
A Tuoi Tre report cited several businesses as saying that they are not so thrilled by the plan. They feel immediate tax reductions, not just deferments, are needed at this difficult time.
Nguyen Thi Kim Yen, deputy general director of a Ho Chi Minh City-based plastics company, said the plan should cut taxes from the beginning of next year instead of delaying them until July.
Vo Van Duc Bay, deputy director of Cho Lon Plastic Enterprise, a major producer in the city, also said the tax delay sounds more like a moral encouragement than real support.
According to figures submitted by the Ministry of Investment and Planning at the meeting, 51,800 businesses have been caught up in the economic crisis in 2012, going bankrupt or having to stop or scale down their operations.
A total of 68,000 new businesses were established in the first ten months, down 10 percent.
Vietnam's gross domestic product rose 5.03 percent this year, down from 5.89 percent in 2011 and the least since 4.77 percent in 1999, the General Statistics Office said. It was much lower than the targeted 6.5 percent at the beginning of 2012.
The government said at the meeting that it has set a GDP growth of 5.5 percent for next year and inflation of less than 2012's 6.8 percent.