Completing tax policies to support the development of small and medium enterprises in vietnam

So the completion of tax policies for enterprises in general and SMEs in particular, from the viewpoint reduce the tax burden, in order to support small business development, and improve

INTRODUCTION

1 Necessity of the thesis

Small and medium-sized enterprises have an important role in the global

economy SMEs account for about 96% of businesses worldwide, contributing

significantly to job creation, economic development, create revenue In

Vietnam, SMEs account for about 97% of the total number of enterprises, using

than 50% of workers and create 47% of GDP and contributes about 40% of

budget revenues With an important role in the economy, SMEs are always

interested governments and development assistance The country was soon

developed SME support policies and has been the most successful Experience

in developed countries shows that SMEs need support on both areas: financial

and non-financial

Standpoint of corporate benefits, tax policy tax burden for SMEs, the

enterprises with financial resources depends largely on equity Therefore,

reducing the tax burden is considered to be a key solution to support SME

development Therefore, tax policy is an important policy in financing solutions

for SMEs The developed nations of the world have been building systems to

support tax policy effective for SMEs

A recent report by the World Bank and global financial institutions (IFC)

on the business environment rankings in 2013 showed that the business

environment in Vietnam does not have many improvements and further

relegation in position 99/189 in the world economy Private sector pay taxes

dropped 11 levels, from rank 138/183 countries, down to 149/189 countries

Vietnam firms take up to one third of working time in the year, ie 872 hours to

comply with tax policy This greatly affects the operation of enterprises,

especially SMEs when many business owners have to both work part-time tax

declaration So the completion of tax policies for enterprises in general and

SMEs in particular, from the viewpoint reduce the tax burden, in order to

support small business development, and improve the investment environment,

is considered as a matter of urgent today in Vietnam

With the above question, the desire to find a way to contribute to complete tax policies to support the development of SMEs, the authors selected

topics: "Completing tax policies to support the development of small and medium enterprises in Vietnam"

2 Research questions

The research questions posed, to be solved as follows:

- The elements of tax policy has created tax burden for SMEs like?

- Status of current tax policy in Vietnam has created the tax burden for SMEs like?

- International experience building and perfecting tax policies to support SMEs and Vietnam how to apply what from that experience?

- Vietnam's tax policy is necessary to improve how to support SME development?

3 Objects and scope of research

Research Subjects

On tax policy: the thesis research profile IRS regulations; tax rates applicable to direct taxes and tax regulations in general management; including management of direct taxes and indirect taxes are applied to SMEs

Business: object of study is the thesis of SMEs, and divided into two groups: SMEs and DNSN because in fact the two groups are now level

"under" the tax burden is not the same The two study groups help thesis has analyzed and proposed more practical

Limit the scope of the study period: The tax provisions in the period

2006-2013 Dissertation proposal content and complete solution to support tax policies for SME development in 2020

The scope of the study subjects: research thesis focused two taxes have

the greatest impact range and today is the most complex VAT and

corporate income tax

4 Contributions of the thesis

The theoretical contributions

First, from a theoretical basis of the tax burden and the results of previous

studies, the thesis clarifies the burden of corporate taxes is constituted by two

factors: the number of direct taxes to be paid and the cost of compliance tax

Thesis indicate the tax burden reduces retained earnings, the financial resources

of SMEs is important Therefore, the improvement of tax policy to support SME

development is an objective requirement

Second, based on analysis generated two factors of corporate tax burden is

the direct tax payable and tax compliance costs, building thesis research

framework burden of VAT and corporate income tax generated business

Number of tax payable depends on the taxable income and tax rates Tax

compliance costs are measured in dollars and time The provisions of the tax

administration is a major factor generating tax compliance costs

Contributions in practice

First, tax compliance costs for SMEs at the time of Vietnam is reflected in

the time declare and pay taxes; Pending tax refund, tax claims; service time of

inspection, checking tax Tax compliance costs reflected cash rent expense

outside tax consultants, pay salaries tax accounting, cost fostering knowledge of

tax and other costs In the survey results, the thesis shows that SMEs in Vietnam

currently incurs huge cost of tax compliance

Second, the thesis proposes to use revenue threshold formula VAT

declaration proposed by Keen and Mintz 2004 Accordingly, the revenue

threshold for VAT declaration and reasonable in Vietnam is 400 million VND

instead 100 million VND as current regulations

Third, the thesis also proposed regulations should be more practical

incentives for SMEs, which is striking: except now allows 150% of the actual cost of investing in science and technology; tax incentives for business start-up; reduce the level of VAT

5 Structure of the thesis

In addition to the preamble and conclusion, the content of the thesis is divided into four chapters:

Chapter 1: Literature review and research methodology Chapter 2: Theoretical basis and practical to improve tax policies to support the development of small and medium enterprises

Chapter 3: Status of tax policy to support the development of small and medium enterprises in Vietnam

Chapter 4: Orientation complete tax policies to support the development of small and medium enterprises in Vietnam by 2020

CHAPTER 1: LITERATURE REVIEW AND RESEARCH

METHODOLOGY

1.1 Literature review

1.1.1 Research on SME development

The concept of SMEs

Pham Van Hong, Tran Thi Van Hoa stated international experience in

defining SMEs through qualitative criteria and quantitative

Qualitative criteria based on the basic characteristics of SMEs as low

specialization, some little clue management, the complexity of managing low

The criteria usually include quantitative targets groups: number of regular

workers, the total value of assets (or capital), revenue or profit

Characteristics of SMEs

First, SMEs have small capital scale, mostly self-owned capital, raised

from friends and relatives

Second, small-scale labor, low labor quality

Third, the main field of activity is the processing sector SMEs,

outsourcing and services

Fourth, the operator usually SMEs owners, so no high-level management

The need to develop SMEs

The limitations of SMEs should be supported: the level of technology

obsolete, old machinery and equipment; restrictions on the size of capital as well

as access to formal sources; limited access to information; level of quality

management and labor restrictions

The view of the development of SMEs

According to Tran Thi Van Hoa, SME has its own characteristics, its own

difficulties, so there should be a policy framework, legal framework, even its

own laws to support SMEs

Pham Van Hong, Nguyen Minh Tuan, Le Thi My Linh, said that SMEs are also part of the economy now, and moreover should not have large amounts

of text should be legal or law regulating private this group of businesses

Policies to support SMEs

The authors Pham Van Hong, Nguyen Minh Tuan, Le Thi My Linh, Tran Thi Van Hoa, have the same opinion that the Government should have policies

to financial and non-financial support to SME development

1.1.2 Research on tax

Criteria for classification of enterprises in tax administration

In research Ministerial 2011: "Research criteria and classification methods to reduce the frequency of corporate tax declaration," Nguyen Quang Tien authors have pointed out the difficulties encountered when using the criteria "number of employees", "total capital" (Decree 56/2009/ND-CP) in tax administration

The authors suggest using the criteria "revenue" to classify business rules applied in the declaration and payment of VAT and SCT

Orientation perfect tax policy

Oriented studies completed tax policy can mention research "orientation completed tax policy after Vietnam joined the World Trade Organization" by Nguyen Phuoc Tien (2010), and research "tax solutions to promote economic restructuring towards industrialization and modernization in Vietnam "by Nguyen Ngoc Tu (2009)

Cost of tax compliance

Cedric Sandford give a definition of tax compliance costs in

"Administrative and Compliance Costs of Taxation" (1989) as follows: " the cost of compliance is the cost incurred by the taxpayer or by a third party (eg business partner) in achieving the requirements of the tax system, including the

external costs of the tax obligations of taxpayers and in addition to the costs that

the tax system has rules "

Factors affecting tax compliance costs

Das-Gupta (2003) studied the cost of tax compliance in India in "The

Income Tax Compliance Costs of Corporations in India, 2000-2001"; La Xuan

Dao (2009) is one of Vietnam's first human study of tax compliance costs in the

topic "Analyzing the impact of compliance costs for taxpayers in the Mekong

Delta."

A study by Business New Zealand-KPMG (2003) survey "First

Compliance Cost Survey" also indicates the factors affecting tax compliance

costs in New Zealand

1.1.3 Evaluation of previous research

First, the unsystematic component elements of tax policy to create the tax

burden for SMEs

Second, no assessment of the current state tax policy in Vietnam has

created the tax burden for SMEs like?

Third, the system has not been international experience in the construction

and completion of tax policy to support SMEs to draw the lessons learned can be

applied in Vietnam

Fourth, not provide perspective and specific content-oriented tax policy in

order completed support SME development in Vietnam with the aim of reducing

the tax burden for businesses

1.1.4 The objective of research

First, determine the theoretical basis of complete tax policies to support

the development of SMEs in Vietnam, including: forming the basis of tax policy

for SMEs; the elements of the tax burden from the provisions of tax policy for

SMEs;

Second, analysis of complete factual basis for the SME tax policy of Vietnam today, including international research experience and analysis of the current state tax policy in Vietnam

Third, the proposal of completing a thesis on tax policy to support SME development On the basis of complete perspective, the thesis proposes solutions content and complete tax policy to support SME development in Vietnam in the coming time

1.2 Research Methodology

Thesis using statistical methods, comparison, analysis, case studies combined with survey methods Methods of analysis, synthesis used in research documents, legal documents about the tax Statistical methods are used to analyze the number of primary and secondary data obtained through the survey method Primary data obtained through the survey is used to assess the status of the tax burden on SMEs

CHAPTER 2: THEORETICAL BASIS AND PRACTICE TO

IMPROVEMENT TAX POLICIES TO SUPPORT THE DEVELOPMENT

OF SMALL AND MEDIUM SMALL ENTERPRISES

2.1 Tax theory and support the development of small and medium

enterprises

2.1.1 The basic theory of taxation and tax policy

Taxes are compulsory contributions to organizations and individuals to

form the state budget

Tax policy is overall attitudes, policies and solutions are specified by the

system prescribed in legal documents on taxation, is used as a basis for the

implementation of State management activities tax

Completing tax policy is the proposed amendment, supplement new rules

for each specific taxes and for tax administration in general, in order to meet the

requirements and objectives

Each type of tax is made up of a number of factors, namely: name;

Taxpayers; Subjects taxable tax base; Tax rates and other factors

Sort by regulating properties, shall be divided into two categories: direct

taxes and indirect taxes Direct taxes directly create burdens for taxpayers

Indirect tax burden created indirectly through business tax compliance costs

Taxes have three main roles: as a tool to mobilize financial resources for

the State; is an effective tool of redistribution policies guaranteed income social

justice; is a tool to regulate the macro economy

Effective tax system to achieve the following requirements: economic

efficiency; fairness; simplicity; flexibility

2.1.2 The concept of small and medium enterprises in tax policy

In view of the thesis, all subjects production business is subject to tax

administration are considered now Thesis criteria used to define SMEs revenue

Thesis divided business groups as follows: group business revenue from 50 to

100 billion VND medium enterprises; business group has sales of less than 50 billion VND small business and individual business households in groups of micro enterprises Therefore, the object of study of the thesis is SMEs have an annual turnover not exceeding 100 billion VND

2.1.3 The view of tax policy to support the development of small and medium enterprises

Balance between the interests of state and corporate interests: To nurture revenues, tax policy can not create undue burdens for businesses However, the formulation of tax policy has its own rules and incentives for SMEs will affect certain revenues to the state budget Therefore, when constructing tax policy to support SME development need to ensure a balance between state interests and corporate interests

Towards effective social tax policy is just one of the tools and solutions to support SME development So when developing tax policy to support SME development should be considered in the perspective of overall social benefit Towards long-term benefits: Although the tax incentives for SMEs can reduce tax revenues in the short term but building tax policies to support the development of SMEs will increase the tax base in the long term, thus ensuring revenue in the long term

2.2 Theory and practice of the tax burden on small and medium enterprises

2.2.1 Tax Burden

The burden of corporate taxes is understood that all expenses that businesses must spend on tax obligations Thus, the tax burden would include the amount of tax payable under the provisions and other costs related to implementation of tax obligations

Tax Burden = direct tax amount payable + tax compliance costs

2.2.2 Cost of tax compliance

By Cedric Sanford (1989), "compliance costs are the costs incurred by the

taxpayer or by a third party (eg, business partners) in achieving the requirements

of the tax system, including the external costs of the tax obligations of taxpayers

and beyond the cost of the tax system that has defined "

Factors affecting tax compliance costs: the complexity of the tax

provisions; frequency declare and pay tax in the year; tax administrative

procedures; method declaration and payment; charged more taxes on the same

tax base; procedures for settling complaints and refund

2.2.3 The need to complete tax policies to support the development of small

and medium enterprises

The results of the empirical research has shown that the reason for the

need to develop policies to support SME development tax include: high tax

burden; The burden of compliance costs regressive scale enterprises; High tax

burden will affect SMEs by reducing retained earnings and create incentives for

tax evasion

2.3 Analytical framework and implementation methodology of the thesis

2.3.1 Analytical Framework

Tax policy

CIT

VAT

Tax rates Tax base

Regulations

on tax administratio

n

(+)

(+)

(+) Cost of tax compliance

CIT payable

( - ) Retained earnings

of SMEs The tax burden

2.3.2 Methodology of the thesis

The thesis will carry out surveys to describe the tax burden of SMEs By allowing businesses assess the income tax provisions and the current VAT, combined with descriptive statistical methods, the thesis will assess the tax burden of SMEs

2.4 International experience building tax system to support small and medium enterprises

Following are experienced tax policy to support the development of SMEs

in a number of OECD countries

2.4.1 The regulations reduce the burden of supporting the cost of compliance

- Build the VAT threshold will reduce the number of SMEs must declare and pay taxes

- Revenue registration threshold to declare and pay VAT in accordance with simple methods

- To offset the burden of high tax compliance costs by preferential VAT rate calculated by simple methods

- Reduced multiple tax rates: only maintain two tax rates

- Reduced frequency of tax declaration

- Construction of presumptive tax system: the DNSN not have to pay more direct taxes and indirect, but only have to pay a presumptive tax Two presumptive tax system is the most popular and presumptive tax under presumptive tax revenue based on the characteristics of the business

2.4.2 The provisions reduce the tax burden on business income

- CIT tax incentives

- Incentives for new businesses established: reduce the corporate income tax rate for newly established businesses

- Support research and development: SMEs have been allowed unless an

expense greater than the actual cost of investing in research and

development at CIT payment

- Encouraging SME investment

- Allow depreciation simple

2.4.3 The content can be applied in Vietnam

- Build the VAT threshold

- Incentives for business bookkeeping records declaring the VAT by simple

methods

- Reduced multiple tax rates: only maintain two tax rates

- CIT Incentives for SMEs

- CIT incentives for newly established SMEs

- Allow accelerated depreciation for assets as equipment and machinery for

the manufacture directly

- Construction of presumptive tax system

CHAPTER 3: THE STATE TAX POLICY TO SUPPORT THE DEVELOPMENT OF SMALL AND MEDIUM ENTERPRISES IN VIETNAM

3.1 Background and socio-economic reality of small and medium enterprises in Vietnam

3.1.1 Economic Context - social period 2001-2012

Continuous economic growth with decent speed, average 6.96% Growth target of 5-year plan of economic development and social 2001-2005;

2006-2010 respectively 7.51% and 7.01% / year National income per capita has increased fairly steadily, averaging 5.7%

By 2012, Vietnam has 44 million people participated in the labor force, equivalent to 51.1% of the population Private sector created the most jobs (more than 87% of total employment) but only 28% of the total social investment

3.1.2 Status of Small and Medium Enterprises in 2001-2012

In 2001-2005

SME sector in the 2001-2005 period there has been a drastic increase in number From 2001 to 2005, there were over 150,000 enterprises registered establishment with registered capital of more than 311 trillion VND

In 2006-2012

Overall for the period 2006-2012, the total number of newly-established enterprises reached about 431052 businesses, including some newly established SME business is about 422430 the total number of registered enterprises established far more than 670,000 business now with registered capital of more than 4,520 trillion VND(approximately $ 218 billion)

Besides, SMEs also contribute significantly to the total revenue In 2010, SMEs contributed 42.5% of total domestic revenue, contribute significantly to the development of the country

3.2 Status of tax policy to support small and medium enterprises in

Vietnam

3.2.1 Status of tax policy to support general business

3.2.1.1 The support to reduce tax compliance costs

With the aim of reducing the burden of compliance costs for businesses

when making their tax obligations , tax policy in Vietnam now has more

regulations in order to create favorable conditions for businesses include:

Supporting information: businesses will be supported, guiding the

implementation of the payment and provision of information and documents to

fulfill the obligation, the tax benefits

Lodge complaints and denunciations: businesses have the right to

compensation by the tax administration , tax administration and public causes as

prescribed by law

Support for self- printing, issuing bills: the associations of individual and

business tax codes are allowed in order to register and issue invoices

Support the declaration and payment of tax: Tax Management Act

regulations allow businesses to make the declaration and payment of taxes

through electronic means

Support for tax registration: implementing the OSS licensing business

registration and tax registration numbers

Supports full deduction of input VAT as a fixed asset purchases

Support businesses involved with regulation of export tax rate of 0%

3.2.1.2 The support to reduce the CIT

The support tax burden is shown in the supporting regulations as reducing

the tax base and reduce tax support

Supports reducing the tax base include provisions on tax-exempt income;

amounts are appropriated from the income before tax and depreciation, loss

carry forward

Tax support for investment projects in areas with difficult socio-economic difficulties, economic zones and high-tech zones

3.2.2 Status of tax policy support for small and medium businesses

3.2.2.1 These regulations support reducing tax compliance costs These regulations support reduces compliance costs include the revenue threshold specified VAT declaration; method applies a simple calculation of VAT; reducing the incidence of VAT declaration and apply the presumptive tax regime Specifically as follows:

First, the regulation threshold to declare VAT revenue is 100 million / year for DNSN

Second, the revenue threshold specified register, declare and pay VAT under the deduction method is 1 billion VND/year

Third, the method applies a simple calculation of VAT

Fourth, reducing the frequency declared: Enterprises with an annual turnover of 20 billion or less are declared and paid quarterly VAT

Fifth, presumptive tax regime applied by revenue in lieu of indirect taxes, such as VAT and special consumption tax, resources tax

3.2.2.2 Regulations to support reducing CIT burden Now has a total annual turnover not exceeding 20 billion tax paid at the rate of 20% (compared to the general tax rate of 22% applies to all 2015) 3.2.2.3 Evaluation of business for a specified number of support

In support of the activities of the business tax, regulation and electronic tax declaration allows businesses to print invoices business community welcomed scores 4.48 and 4.45

The other supporting activities: support procedures to declare and pay taxes; tax refund; resolving complaints; accelerated depreciation provisions of the declaration were rated below average scores respectively: 2.63; 2.58 and 2.46 with 30% less satisfied comments

3.2.3 Evaluation tax policy to support small and medium enterprises

3.2.3.1 The encouraging results

First, businesses are creating favorable conditions to access the latest

information

Second, business rules allow tax declaration and tax payment by

electronic transfer methods are the business community are welcome

Third, the turnover threshold was launched to identify SMEs

Fourth, the construction method of VAT calculation simple

Fifth, CIT Law has supported many regulations on business income tax

exemption and preferential income tax rate

Sixth, regulations set up funds for science and technology policy reflects

the correct orientation of the government to encourage the development of

science and technology, thus contributing to reduce the tax burden

3.2.3.2 The limitations to be overcome

First, even otherwise specified threshold to declare VAT revenue is 100

million VND/year but this threshold is not really reasonable

Second, the presumptive tax regime is not completely reduce tax

compliance costs for businesses as presumptive tax not included PIT

Third, reimbursement support and resolve tax claims not create

satisfaction for the business community

Fourth, the provisions on tax exemption, tax incentives have not really

made clear to the EIT Law became complicated

Fifth, rules set up funds for science and technology has not really set up

funds for SMEs encouraged

3.3 Status of the burden of tax compliance costs of small and medium

enterprises in Vietnam

3.3.1 Description of the research steps

Through in-depth interviews with staff tax accountant and tax consultant staff, the thesis shows that business activities must be carried out to implement the tax liability and a number of factors affecting tax compliance costs, served for the design of the questionnaire

On the basis of information obtained from in-depth interviews, thesis design two types of questionnaires: enterprise (legal status) and individual business households (DNSN) Questionnaires were sent and start collecting from 01/03/2013 until 05/14/2013 Total receipts of respectively 394 and 146 votes

Of the 394 enterprises, 58 enterprises have an average annual turnover of more than 50 billion VND

3.3.2 Conclusion on the status of the tax burden of small and medium enterprises

First: Every year businesses more time to implement tax obligations The average time to perform regular activities include: time to declare VAT, corporate income tax return time and time collection , storage bills and vouchers

of 247 hours/year;

Second: In addition to the cost of time, businesses also have to pay cash to carry out their tax obligations

Third: "Time collection bills, vouchers" is now considered the largest contribution in the cost structure of the business tax compliance

Fourth: "frequency declaration" is said to have greatly influenced the VAT declaration time

Fifth: "The amount of information must be provided" has the second largest impact to time declare VAT

Sixth: Meanwhile "tax rate" and "accounting regime complex" and

"specified tax incentives unclear" for the three biggest factors creating tax burden

Seventh: propaganda support for microenterprises tax has many

limitations and inefficient operations

Eighth: 100% microenterprises be asked to pay VAT under the

presumptive tax methods

Ninth: There were 60.2% microenterprises that more tax is payable, thus

increasing the cost of tax compliance

CHAPTER 4: ORIENTATION COMPLETE TAX POLICIES TO

DEVELOPMENT IN VIETNAM BY 2020 4.1 Pursuant to complete tax policies to support the development of small and medium enterprises in Vietnam

Complete tax policy direction to support SME development thesis built

on the basis of the policy of the State in tax policy and SME development, including strategic tax reform plan SME development and policy support SME development

4.2 Orientation complete tax policies to support the development of small and medium enterprises in Vietnam by 2020

4.2.1 The view of the complete dissertation on tax policy to support the development of small and medium enterprises

First, SMEs classified into groups, there are specific regulations on tax, applied to each target group of SMEs

Second, the contents must be completed towards the simplicity of the tax system

Third, tax policy must be completed in accordance with management skills and reduce tax administration costs

Fourth, ensure budget revenue

Fifth, ensure fairness

Sixth, should create incentives for SME steps involved in the tax system standards

4.2.2 Orientation complete tax policies to support the development of small and medium enterprises

For VAT

First, build the threshold for declaration and payment of VAT: proposed thesis uses the revenue model of threshold proposed by Keen and Mintz 2004