A recent report released by the NA's Economic Committee showed that Vietnam has ratios of tax revenue to GDP at 1.4-3 times higher than neighbouring countries.
Vietnam has highest tax rates in Asia
Unofficial taxes and corruption
The report pointed out that the taxes and fees are on the rise in Vietnam, while the state's revenue has remained quite stable during the 2007-2011 period, standing at around 29% GDP, of which 26.3% was derived from taxes and fees.
The revenue from crude oil accounted for 21.6% GDP of the state's budget and has continued decreasing. In 2007, revenue from crude oil stood at 6.9% but fell to 3.1% in 2011, indicating that revenue from others sources was increasing.
In the last five years, Vietnam has the highest ratios of tax revenue to GDP in the region and in comparison with other emerging Asian countries at 20% while in China they are 17.3%, 15.5% Thailand and Malaysia, Indonesia 12.1% and India just 7.8%. In 2010 and 2011, Vietnam’s tax rate continued to rise from 22.6% to 24.4%.
The report said the people not only have to bear "inflation tax" but other taxes arising from subsidies, import tax, excise tax and "unofficial tax" rises.
The Provincial Competitiveness Index (PCI) in 2011 reported that 52% of enterprises said they had to bribe state agencies to make work smoother. 7% of enterprises said 10% of their income was used for unofficial spending.
While small scale bribery had decreased, large bribery had become more common. 56% of enterprises who have participated in bidding for state projects said making corruption payments was common.
High taxes may encourage fraud
High taxes not only hinder investment and development but also encourage tax fraud. Recently, many foreign invested companies have report lower product prices than their actual prices to avoid taxes.
Although foreign invested firms account for 20% of GDP their contribution to the state budget is less than 10%. Many companies though repeatedly reporting losses still ask for permission to expand their businesses.
Vietnam’s tax revenue mainly come from regressive VAT, corporation tax and import and excise taxes. In the recent past, the VAT and import taxes have increased while the other taxes have fallen.
The report pointed out that if the government continues to depend on these taxes then Vietnam budget deficit will escalate when the country is forced to cut taxes in accordance with its WTO commitments.
Vietnamese tax rates in comparison with neighbouring countries