In an interview given to Thoi bao Kinh te Vietnam, Mr Sud said that Eurocham applauded the intention to lower the corporate income tax (CIT) from 28% to 25%.

However, he thinks that the ministry should reconsider the plan to keep a cap on businesses’ expenses on advertisement and business promotion.

The CIT bill stipulates that the total expenses for advertisement and business promotion enterprises can spend must not be higher than 10% of total expenses. This means that if enterprises spend more than the allowed level, the excessive sum of money will not be considered as legitimate expenses, and will be taxable.

“Vietnam is the only country in Asia that applies the cap on advertisement and business promotion expenses. The limitation does not benefit the national economy and consumers,” Mr Sud said. With such a regulation, the taxation scheme is hindering businesses’ advertisement and business promotion.

Besides, bonus for businesses’ staffs also is not considered as legal expenses. According to Mr Sud, Vietnamese employees now get two kinds of income, fixed salary and irregular income. The quarterly, annual or holiday bonuses are a kind of irregular income. Enterprises always give bonuses in order to encourage labourers to increase their productivity, and the irregular income should be considered as a kind of legitimate expense.

In fact, foreign invested enterprises all have the expenses for advertisement and business promotion exceeding 10% of total expenses, while local enterprises do not use up the allowed sums. Law makers may fear that if not imposing a limit on advertisement expenses, domestic owned companies will be inferior to foreign invested ones in promoting business.

Mr Sud said that Vietnam is pursuing a transparent policy in order to attract more foreign investment. It is also trying to set up an equal playing field for both domestic and foreign enterprises, therefore, it should not think of supporting local enterprises by setting up limits on expenses.

According to Mr Sud, the State should see bonuses and salary as legitimate expenses. This may lead to the lower taxable income of enterprises, but this will help the state collect more personal income tax from labourers.

Mr Sud said that the national economy will benefit if the state removes the cap on advertisement expenses.

When enterprises increase their expenses on advertisement and business promotion, this will lead to fiercer competition of goods and services on the market. If so, the products’ quality will be improved while the prices will decrease, which will indirectly help reduce inflation.

If the State insists on imposing the cap of 10% on advertisement and business promotion expenses, the real production cost of enterprises will be higher, which will force enterprises to raise the sale prices to offset the high expenses. If so, the prices of goods and services will increase, which always affect consumers’ interest.

Source: TBKTVN