At a recent meeting between Prime Minister Pham Minh Chinh and the Ministry of Planning and Investment (MPI), the ministry's Minister Nguyen Chi Dung stated that, as requested by the government, the MPI is continuing to formulate new policies and solutions to assist people and businesses vulnerable to COVID-19. Such policies will be submitted to the government this month.
"All solutions will help people and enterprises capitalise on possible opportunities to recover from their difficulties, helping the economy grow further," Minister Dung said.
The MPI is now also building up a governmental resolution on supporting and developing enteprises for the 2021-2025 period, while also formulating pilot mechanisms for innovations and startups, in which all enterprises are encouraged to invest in innovation, while a governmental fund on adventure investment will also be created to support innovation activities of enterprises.
In addition, at a recent press conference organised by the Government Office, MPI Deputy Minister Tran Quoc Phuong also revealed that in February 2021, the MPI began to send a draft of some solutions to the relevant ministries to ask for their comments and feedback, which will then be collected by the MPI before being reported to the government.
A helping hand
In the context of the complex, unpredictable evolvement of the Covid-19 pandemic globally, which has caused worldwide supply chain disruption and a negative impact on almost every economic sector, the government has implemented and is going to implement several measures to ease the financial burden on impacted taxpayers.
On April 19, the government issued Decree No.52/2021/ND-CP on the extension of time limits for the payment of VAT, corporate income tax (CIT), personal income tax, and land rental in 2021. This decree took effect immediately.
"The total size of the package was estimated at VND115 trillion (US$5 billion). If implemented well, it is expected to help businesses and households maintain their economic activities, particularly in tourism, which remains depressed," the World Bank said in its March bulletin on Vietnam's economy.
Specifically, Decree 52 extends the time limits for payment of the payable VAT amounts for the tax periods of March-August 2021 (if making monthly VAT declarations), and the tax periods of first and second quarters of 2021 (in the case of quarterly VAT declarations) of enterprises and organisations.
The extension is five months for the VAT amount of the tax periods of March-June 2020, and the tax periods of first and second quarters of 2021; four months for the VAT amount of the tax period of July 2021; and three months for the VAT amount of the tax period of August 2021.
Businesses and organisations eligible for an extension of their tax payment time limits shall make and submit monthly or quarterly VAT declarations but are not required to pay the VAT amounts owed and stated in VAT declarations already filled in.
Besides this, the time limit for the payment of the payable land rental amounts for the first period of 2021 of enterprises, organisations, business households, and individuals that fall into the relevant categories as prescribed and are leasing land directly from the state under decisions of or contracts signed with the competent state agencies in the form of annual payments of rental is also extended by a further six months, from May 31.
The Ministry of Finance (MoF) said Decree 52 is necessary as it will help firms and individuals have more financial resources to maintain and recover their production and business activities, contributing to helping the country achieve its economic growth of an expected 6.5% this year.
On the 31 March 2021, the government also issued Decree No.44/2021/ND-CP allowing enterprises claim a CIT deduction for support expenses and donations for the protection against and prevention of the COVID-19 pandemic in Vietnam.
In order to claim a CIT deduction, enterprises must meet certain requirements. Concretely, the support and donations must be carried out via qualified organisations, including Vietnam fatherland front committees at all levels; public health stations; armed force units; units and organisations assigned by competent state agencies to serve as centralised isolation site; educational institution; press agencies; ministries, ministerial-level agencies, government-attached agencies; party organisations, youth unions and trade unions at all levels; local government agencies and units at all levels who have the function of calling for donations and support; COVID-19 prevention and control fund at all levels; the national humanitarian portal; charity, humanitarian funds and organisations with the function of calling for donations established and operated in accordance with the prevailing laws.
Moreover, enterprises must also maintain minutes of alls support and donation attached together with Decree 44, or other documents (either paper-based or in electronic form) proving the support and donations, signed and sealed by the donating enterprises and those receiving. Legitimate invoices and supporting documents of the donation must be available as well.
In addition, the Ministry of Finance is also mulling over other solutions to support enterprises.
Currently it has decided to reduce environmental protection tax on aircraft fuel by a total of VND900 billion (US$39.1 million), and reduce the collection of some fees worth VND1 trillion (US$43.47 million). The Ministry of Labour, Invalids, and Social Affairs is also reviewing the implementation of a VND62 trillion (US$2.7 billion) package launched one year ago to support 20 million poor and unemployed people.
The package comprised of a VND16 trillion (US$695.65 million) sum aimed at providing loans to businesses at a 0% rate in order to help them pay salaries for employees.
Since the second quarter of 2020, the government has also been deploying some drastic measures to support businesses. For instance, the State Bank of Vietnam has deployed a package worth VND180 trillion (US$7.82 billion) for enterprises and households, in the form of debt payment deferral and preferential loans. However, no concrete reports on how this huge package has been executed have been revealed.
Last September, the government also promulgated Decree No.109/2020/ND-CP providing an extension on time limits for excise tax payments for domestically manufactured or assembled cars.
Decree 109 extended the time limits for payment of the payable excise tax amount incurred in the tax period March-October 2020 for domestically manufactured or assembled automobiles.
Affecting the state budget
Experts have said that the above-mentioned policies will, to a certain extent, dent the revenue of the state budget, amid an expected budget deficit.
According to the International Monetary Fund (IMF), Vietnam's fiscal deficit is expected to reach 5.4% of GDP in 2020, compared to the 3.5% envisaged in the budget. This is due to declining revenues and the operation of automatic stabilisers. Higher cash transfers and capital spending will boost spending.
The IMF have said that in 2021, the headline deficit is expected to narrow as priority expenditure remains in place to support the recovery, while revenues recover with improved economic activity, albeit only gradually owing to loss carry-forward provisions. The fiscal stance would thus be moderately contractionary - the cyclically-adjusted primary deficit is projected to decline by 0.4 percentage points - even though other spending, including health and public investment, would increase, relative to the 2020 budget and 2019 outcomes.
Commenting on the potential new support packages in the future for enterprises, Do Van Sinh, member of the National Assembly Economic Committee, said that new economic stimulus packages are necessary as enterprises are facing numerous difficulties. However, he said, in order for the packages to materialis, it is necessary to have a closer look at the state budget situation.
Vietnam witnessed a total budget deficit of VND274.3 trillion (US$11.9 billion) in 2020 and VND273 trillion (US$11.87 billion) in 2019. "Thus if another economic stimulus package is promulgated, how much will it cost, especially given the numerous difficulties in the state budget?" Sinh said.
Meanwhile, National Assembly deputy Truong Minh Hoang, representing the southernmost province of Ca Mau also said, "It is quite necessary to have new economic stimulus packages to further support businesses. However, before implementing this initiative, it is also necessary to consider the existing state budget situation, expected to see another budget deficit this year. Thorough studies must be conducted so as to decide what sectors and who will benefit from the new package. It is urgent now to provide more support to businesses."
