Hanoi (VNS/VNA) - The Government has decided to implement a 30 percentcorporate income tax (CIT) cut for certain businesses for the 2020 financialyear.

Vietnam’sNational Assembly on June 19 ratified the Government’s proposal to cutcorporate income tax by 30 percent.

Accordingto Decree No 114/2020/NĐ-CP, all enterprises, cooperatives, agencies andorganisations established under Vietnamese law and generating income of no morethan 200 billion VND (8.58 million USD) a year are eligible. The 30 percentreduction is only applicable to income generated in 2020.

Incases of a newly established enterprise or those which have changed their form,ownership, or have undergone consolidation, merger, acquisition, dissolution orbankruptcy in a month, the operation period shall be counted for the full month.

Incases where the enterprise expects total revenue in the 2020 corporate incometax period to not exceed 200 billion VND they shall determine the quarterlytemporary payment equal to 70 percent of the payable CIT amount of the quarter.

Recently,the Board for Private Economic Development Research proposed a 30 percentCIT reduction for all businesses in 2020, instead of only applying tobusinesses with total revenue of less than 200 billion VND.

Theboard also proposed to reduce value-added tax from the current 10 percentto 5 percent with an aim to stimulate consumption.

BuiThi Khanh, a resident from Hoa Binh province, said that the VAT reductionwould be a huge incentive at a time of declining income due to the effects ofthe COVID-19 pandemic.

Witha debt of over 200 million VND, Khanh was forced to leave her hometown and cometo Hanoi to find a job. The job was unstable while expenses for everyday liferemain unchanged. The price difference of only a few thousands of VND issignificant.

Formost consumers, if VAT is reduced by 5 percent, it will help as their incomedrops.

Whenconsumers shop more, they will help businesses, thereby stimulating production.Therefore, the VAT reduction is considered a supportive policy that candirectly affect all in society, especially those with low incomes.

However,according to tax experts, there are currently 14 groups of goods that enjoy a 5percent VAT incentive. The simultaneous reduction of VAT to 5 percent wouldequalise all goods and services, not creating the necessary priority for goodsthat need to be encouraged. VAT is currently the largest source of revenueamong all taxes. If the Government chooses the option to reduce VAT tostimulate demand, there would be more pressure on the State budget.

Taxexperts also said businesses have strategies in accordance with the currentmarket. For example, with airlines or hotels, although VAT has not beenreduced, the price of air tickets and room rates have fallen.

NguyenThi Cuc, Chairwoman of Vietnam Tax Consulting Association, said it's not just atax reduction, but will also decrease the price. Tax is part of the internalstructure. In the case of a strong market, the price will naturally go up.Therefore, a tax reduction is not exactly a price reduction.

Currently,the basic VAT rate is 10 percent while the preferential rate is 5 percent in Vietnam.The level is still lower than the global average. I think we should find othermeasures and not reduce VAT to stimulate consumption./.