Vietnam urged to remove cap on ad spending

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The European Chamber of Commerce has requested the government to eliminate a cap on advertising and promotional expenditures, saying the restriction is not good for competition.

EuroCham said the cap should be removed or at least applied only to certain industries if necessary, Thoi Bao Kinh Te Vietnam newspaper reported Saturday.

Vietnam's Corporate Income Tax Law only recognizes a maximum advertising cost of 10 percent of total expenditures, which means any exceeding promotional spending above that ceiling is not eligible for tax deduction.

Thoi Bao Kinh Te Vietnam quoted EuroCham as saying that the 10 percent cap was introduced probably in an attempt to prevent companies from overstating their expenses to lower their income tax payments.

The European business community, however, argued that such a restriction is not an effective measure against tax evasion. The cap hurt small and medium enterprises and affected competition, it said.

Late last year Eurocham called for a review of the advertising and marketing expenditure cap. "EuroCham strongly believes that allowing the full deduction of advertising and promotional expenditures will have a major positive effect on future economic development in Vietnam, increase the attractiveness of Vietnam for long-term investment, increase GDP per capita, provide Vietnamese consumers a larger choice at lower prices, and encourage Vietnamese businesses to start to build their brands," it said.

A committed roadmap towards the full removal of the cap by 2012 or earlier will create confidence within the European business community, it added.

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