Comment by Prime Minister Phan Van Khai (English translation)

Tiếng Việt – Vietnamese

Dialogue between the Prime Minister and businesses: taxation is complained the most
On-line Thanh Nien Newspapers (TN), Friday October 15, 2004

On the 14th of October, at the dialogue between “the Prime Minister and businesses for 2004”, Prime Minister Phan Van Khai spent a lot of time to require ministries, branches, localities to properly implement policies for improving the business environment so as to revive entrepreneurship of Vietnamese people.

“What burdens in my mind is a corrupt apparatus”

Prime Minister Phan Van Khai 2006 (PM 1997-2006)”… Now, there have been improvements in policies but still there are a lot of negative acts at lower levels. For example, tax policies are proper but tax collectors are not proper, ill-treating taxpayers, then such policies will lose their effects … At the moment, leaders of many provinces, cities have recognized the need to support businesses, but officers, civil servants do not properly implement the regulations of provinces, cities, of the Government, red tape and corruption is an serious outstanding issue. This is a big issue … The representative of the American Chamber of Commerce says that corruption in our country is widespread, neutralizing the State Apparatus, even there is rule of law but it turns out be no rule of law at all. Hearing this may make us uncomfortable but it is an actual fact and we should take it as a pain. I do not know how other cadres think but I think that is a fact … We keep on saying ‘take care of the people but negative acts occur everywhere then people do not trust in us. For many years in the position of a prime minister, an issue that has been burdening in my mind, and certainly even until retirement, is our corrupt apparatus, how can we push back … From now to early 2005, I am going to establish task force teams to check, review all procedures, anything that can create obstacles on businesses in order to see how … If everything is made transparent, then there are no reasons why the economy cannot be healthy? See the mistakes but do not correct is a real risk to the country.”

Some urgent complaints from businesses

Representatives of a number of businesses in HCMC said: Currently, there are many businesses who have not been able to finalize their tax accounts and whether tax account finalization is quick or slow depends to a great extent on the attitude of tax officers; with easy-going officers finalization is smooth, with hard officers we have to endure, also depending on “know-the-game” attitude of businesses towards tax finalization officers.

Developments at the dialogue also showed that financial aspects were the focus of hot complaints from businesses, 65 recommendations directly raised at the meeting and 120 recommendations collected in advance. Mr. Truong Chi Trung – Deputy Minister of Finance – was the single official designated by the Prime Minister to respond to businesses.

On the part of FDI businesses, Mr. Le Hue Kiet, an overseas Vietnamese, Director of Hoan Cau (Globe) Pte Ltd wrote in his recommendations sent to the meeting: “During the 10 years investing in Vietnam, we have been incurring many “negative” costs impossible to declare but had to silently endure them because those costs are considered operating profits and taxable”.

The representative of American Chamber of Commerce in Vietnam spoke: “We appreciate Vietnamese competent authorities for recent detection of big cases of bribery and corruption, but [the Government] should develop transparent policies so as to prevent in advance bribery and corruption”.

There must be fairness and accountability

Mr. Vu Duy Thai, Vice Chairman of Hanoi Commerce & Industry Association commented: “Draft Decree providing Guidance on the Land Law sets extremely high land price tariff: about 7 billion VND/ha, or 7 times higher than previously. Such high prices will drive businesses into financial difficulty”. Mr. Truong Chi Trung responded: “On the other hand, there are comments from many people that the tariffs for land clearance are still low, should be increased (i.e. should increase land price tariff – TN). We are working together with other ministries to develop the draft land valuation, considering appropriate provisions so as to allow land allocation to businesses on a market price basis, ensuring the interests of people whose land parcels are revoked”.

Also in response to Mr. Thai’s comment that there are excessive formalities in seal making, official invoice purchasing, tax code registering … delaying and increasing business establishment costs, Mr. Trung said: “We take note this comment for considering the reduction from early 2005 of procedures, approval steps”.

With respects to complaints by businesses that VAT refund by tax authorities is too slow, Mr. Trung said: “the Ministry of Finance also recognizes it as a big issue in tax management creating disadvantages to businesses in general; however, the Ministry of Finance recently has resolved it to a great extent. We have instructed ‘refund first, inspection later’ for businesses possessing transparent financial statements & documents, exporting through the formal channel, possessing shipment contracts … For businesses possessing unclear financial documents & accounting books, exporting through informal channels … ‘inspection first, refund later’ shall be applied”. Mr. Trung continued: “After a series of tax refund offenses, tax officers in many places are afraid of responsibility and thus keep it rigorous. We will make improvements so that tax refund can be faster”.

Observing such dialogue, Prime Minister Phan Van Khai said: “Taxpayers with late payments are fined, why tax officers with late refunds take no responsibilities? We must be fair and take clear responsibility in this issue” (all participants simultaneously applauded).

In general, many businesses are not satisfied with the response of Deputy Minister Trung because many recommendations on tax and customs policies which were promised to be resolved at the dialogue between leaders of the Ministry of Finance and businesses in July 2004 have not been resolved until today.

Support businesses not by subsidies, tax reductions

In his ending remarks for the meeting, the Prime Minister asked the Government Office to collect recommendations of businesses for the Prime Minister to instruct ministries, branches to resolve. The Prime Minister called upon the business community to strive, to learn, to enhance competitiveness so as to expand to the world market. The Prime Minister emphasized: the Government will support businesses not by subsidies, tax reductions … but by policies to improve business environment, remove obstacles, implement human resource development programs, enhance managerial skills for businesses …

In addition, Prime Minister Phan Van Khai did not agree with the petition from a number of businesses for protection policies from the State – those who conduct business activities in high profit margin sectors but still ask for support from development funds, investment funds … of the State. Prime Minister told the audience that, in the coming dialogues with businesses, he would think of ways to organize those meetings in a “better and more attractive” manner.

Recommendations from businesses …

  • “Should set uniform regulations for all ports in terms of formalities, procedures and timing for export & import shipments; specify which branches are allowed to make decisions relating to procedures at the ports, procedures for goods in transport. Should avoid the situation where all branches have authority, resulting in abuse of power, businesses are unable to predict anything, hard life”. Mr. Nguyen Thai Son, Director of General Trading Company of Kon Tum Province.
  • “The invoice issued to a business acts as the certificate of origin for goods transport purposes, but a series of regulations of ministries, branches in Vietnam has made this inapplicable and businesses are always in the position of violations. For example, the regulation that the invoice accompanying the transport means must be the original one, but if goods are delivered in multiple shipments, carried by multiple carriers to different places then businesses cannot comply with this regulation”. Mr. Dao Nguyen Phung, Deputy General Director of LG-VINA Cable JV
  • “Prevailing laws and regulations on land in general and industrial land in particular are too much complicated and lengthy which can be understood and interpreted in different ways, creating favorable conditions for corruption, red tape, discouraging investors. People as well as businesses want to comply with procedures, regulations but they cannot do it themselves”. Mr. Le Quang Doan, Director of Minh Dieu Manufacturing-Trading Pte Ltd.

    Prime Minister Phan Van Khai: “What burdens in my mind is a corrupt apparatus”

    ”… Now, there have been improvements in policies but still there are a lot of negative acts at lower levels. For example, tax policies are proper but tax collectors are not proper, ill-treating taxpayers, then such policies will lose their effects … At the moment, leaders of many provinces, cities have recognized the need to support businesses, but officers, civil servants do not properly implement the regulations of provinces, cities, of the Government, red tape and corruption is an serious outstanding issue. This is a big issue … The representative of American Chamber of Commerce says that corruption in our country is widespread, neutralizing the State Apparatus, even there is rule of law but it turns out be no rule of law at all. Hearing this may make us uncomfortable but it is an actual fact and we should take it as a pain. I do not know how other cadres think but I think that is a fact … We keep on saying ‘take care of the people but negative acts occur everywhere then people do not trust in us. For many years in the position of a prime minister, an issue that has been burdening in my mind, and certainly even until retirement, is our corrupt apparatus, how can we push back … From now to early 2005, I am going to establish task force teams to check, review all procedures, anything that can create obstacles on businesses in order to see how … If everything is made transparent, then there are no reasons why the economy cannot be healthy? See the mistakes but do not correct is a real risk to the country.”

    Tiếng Việt – Vietnamese