Oiling wheels of a slow moving machine

17:22 | 06/12/2012
Vietnam improved its ranking in respect to tax facilitation as seen in the recent World Bank and International Finance Corporation (IFC)’s Doing Business 2013 Report, but it remains near the bottom among ASEAN countries. Hoang Thi Lan Anh, deputy head of General Department of Taxation (GDT)’s Reform and Modernisation Department, sheds some light on the matter.

Vietnam’s tax sector was in ninth position among ASEAN countries in tax facilitation. What is your view?

First of all, I need to say that Vietnam has moved up 15 notches in tax facilitation in Doing Business 2013 report compared to 2012. This came as the tax sector has made constant efforts striving for tax procedure simplification. The application forms relevant to tax registration, declaration, reduction/exemption or refund were made simpler and those forms no longer matching modern tax management practice were abolished.

However, the main cause why the ranking fell below our expectations was not in the tax sector.

What is it?

The World Bank and IFC’s ranking is impartial and objective. In many countries, the tax sector handles both tax and social insurance administrative procedures, so that the World Bank and IFC have mixed these procedures together and considered them as tax administrative procedures.

In Vietnam, these procedures are separate and handled by different state bodies. Businesses have to exert much time and energy also into handling social insurance procedures.

Particularly, in the Doing Business 2013 Report,  Vietnamese firms needed to handle tax and social insurance procedures 32 times [during the year], of which they handle insurance procedures 12 times. Of  941 hours firms spend on making procedures, insurance procedures accounted for 372 hours.

If insurance procedures are not included, the time for settling tax administrative procedures in Vietnam scaled down to 569 hours during 2011-2012 compared to 650 hours during 2009-2010 and businesses embraced tax procedures only 20 times per year.

What is the GDT response in this case?

We sent a report to the Ministry of Finance proposing the government take measures to accelerate administrative procedure reform in social insurance. Efforts from the tax sector alone are not enough to ameliorate Vietnam’s ranking in respect to business climate.

The tax sector set to be named among top five by 2015 and top four by 2020 among ASEAN countries in tax facilitation. Is the target ambitious?

When setting this goal, we counted on a number of factors and had high commitment to realising it. Accordingly, the tax sector is busy working on guiding documents to the amended version of the Law on Tax Administration which will come into force from July 1, 2013. Noticeably, the law envisions reducing value-added tax declarations and payments of small and medium size businesses from 12 times to only four times per year.

The move would benefit around 85 per cent of firms while saving firms over VND144 billion ($6.8 million) and the tax sector around VND500 billion ($23.8 million) per year as expenses in handling tax administrative procedures.

The above target would be within reach if both the insurance and the tax sector tried their best to facilitate reform of administrative procedures through using information technology progress, thus supporting taxpayers in an effective manner.  

By Manh Bon


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