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Tax policy should focus on consumers

Update: February, 12/2014 - 09:35

Policy makers should pay more attention to tax incentives that help stimulate consumption, experts said.— Photo misa

HA NOI (VNS) — Policy makers should pay more attention to tax incentives that help stimulate consumption, experts said.

Associate professor and Dr Le Huy Duc from National Economics University said that since early last year, the Government of Viet Nam offered tax exemptions, tax deductions or extended payment times for enterprises as a relief during the economic slowdown.

However, such incentives were not as effective as expected, Duc said, adding that during past time, most of tax policies focused on supply-side effects through measures stimulating investment and production.

Although many experts recommended to support demand side through reducing value added tax or special consumption tax, such recommendations had yet to be implemented, he said.

In the Whitebook 2014 of Trade, Investment Issues and Recommendations launched last November, the European Chamber of Commerce in Viet Nam (Eurocham) also urged to remove import tax in the Free Trade Agreement that Viet Nam and EU are negotiating.

According to Eurocham, high import tax and special consumption tax [the tax imposed on various imported products like tobacco, beer and wine, cars, private planes and boats to limited import ] caused the surge of smuggling or making fake products and consequently, the State failed to collect proper taxes, reported Thoi bao Ngan hang ( Banking Times).

For example, if Viet Nam's Government removed tax burdens and reformed tax rate for imported wines and alcohols through imposing tax rate based on alcoholic concentration, it would curb smuggling and better control tax payment from legal trade activities.

Dr Nguyen Minh Ngoc from National Economics University said that if tax policies were used as a tool to support enterprises, it was necessary to make them facilitate the innovation in enterprises.

"During economic slowdown, consumers tighten their belt and enterprises must be sensitive to offer products/services that meet consumers' changed paying capacity," she said.

However, Vietnamese enterprises remained passive in innovating, Ngoc said, adding that to adapt to changed business environment, many of them preferred low-price strategy to differentiation strategy [ which focuses on making their products different from others].

To achieve sustainable growth, enterprises had to improve quality of their products and services as well as create their differences, Ngoc said.

"Government needs to have policies that directly reduce tax imposed on products such as value added tax," she said, noting that the move would help enterprises escape from the circle of low-price competitive strategy. — VNS

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