The Vietnamese government is set to raise budget deficit limit to 5.3 from 4.8 percent of gross domestic product beginning next year as the country has had trouble collecting taxes.
Prime Minister Nguyen Tan Dung said the government allowed the cap increase because the situation was "too difficult." Vietnam had earlier hoped to keep thebudget deficit at 4.8 percent until 2015.
The decision came via a proposal by the Ministry of Finance, which forecast that Vietnam will lose VND59 trillion (US$2.79 billion) in this year's tax revenues.
An increase in the threshold of personal income tax -- to VND9 million from VND4 million -- and a decrease of corporate taxes for small and medium firms -- to 22 percent from 25 percent -- both enacted last July, are expected to cause a combined VND30 trillion reduction, according to the ministry.
A corporate tax rate of 22 percent will apply to all firms starting January 1, 2014.
As of mid-September, the government had collected VND509.7 trillion in taxes this year while budget spending hit VND640.37 trillion, official data showed.
PM Dung said the move will enable an increase in expenditures on public investment and the government planned to issue more bonds next year.
The bond issuance will not lift the public debt ceiling, currently set at 65 percent of the GDP, he added. The Economist website estimated that Vietnam's public debt so far this year accounted for 48.6 percent.
Vu Duc Dam, head of the government office, had earlier estimated that the country's spending on public investment would increase by 8.5 percent year-on-year to VND255 trillion next year, and the adjustment to the budget deficit limit was necessary.
"˜At the bottom'
According to the finance ministry, around 42,450 businesses shut down or halted operations temporarily in the first three quarters.
Less than 35 percent of existing firms reported pre-tax profits during the period.
News website Saigon Times quoted Tran Dinh Thien, head of the Vietnam Institue of Economics, as saying late last month that the economy had struggled "at the bottom" for the past two years.
This year the economy has expanded 5.1 percent through September, a slower pace than expected by the government.
Last year, Vietnam saw its slowest GDP growth in 13 years.
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