It was indeed very encouraging to see that at the beginning of August, the Vietnamese National Assembly unveiled a resolution aimed at offering small and medium-sized enterprises (SMEs) a 30% reduction on their corporate tax for help them cope with the impact of the COVID-19 pandemic. Although they only apply to companies with a total turnover of less than VNÄ200 billion (USD 8.65 million), SMEs are said to represent up to 97 percent of businesses in Viá»t Nam, which means that such a decision is likely to prove to be a lifeline for many -strikes companies operating below this level.
The Ministry of Finance has estimated that tax revenues will fall by around 23 trillion dong this year. Yet while this is a significant amount with a global recession weighing on us, I thought this decision showed a remarkable degree of wisdom and generosity to the business community. Similarly, governments across the West have extended their support, including subsidizing workers’ wages through job retention or “leave” programs. The costs are undoubtedly immense ($ 130 billion and UK cash), but policymakers rightly take a long-term view. If companies go bankrupt and workers are permanently laid off on an unmanageable scale, economic carnage will ensue.
Deaths and taxes
It all got me thinking about how important – and emotional – tax is.
In 1789, one of the founding fathers of the United States, Benjamin Franklin, wrote: “In this world nothing can be said certain except death and taxes”. And it is as true then as it is today that both are about as popular as they are inevitable. Most of us are reluctant to pay our taxes, but we all have to admit that paying our dues is a fundamental pillar of society. Without income and profit taxes, this simply could not exist. Otherwise, how would essential infrastructure and institutions such as roads, hospitals and schools exist?
Governments need to determine who to tax, how much, when, and why, before âsellingâ their plan to the people. Tax authorities have broad powers, but they must make payments as acceptable – and easy to bear – as possible. There is a very good balance to be struck if governments want to maximize “tax taking” but avoid all the negative consequences that come with overloading individuals and businesses. Trying to avoid or even evade taxes, curb business investment, and even completely dissuade people from getting into entrepreneurship are real risks. In a globally connected and truly mobile world, countries must be careful not to push people and businesses to go elsewhere.
Some argue for uniform taxation around the world so that jurisdictional âtax arbitrationâ becomes a thing of the past. When you see multinationals getting creative in their accounting and domiciliation to minimize their liabilities, it’s easy to see why some might favor this. However, many others and I believe it is healthy for governments to have an element of tax competition in mind when setting their levels. Keeping things reasonable is in everyone’s best interest, from the highest in society to the lowest, I believe. Indeed, there is ample evidence that tightening the tax screw rarely increases overall revenue. Even if people and businesses stay put (which history tells us they often don’t), the costs of collecting from a reluctant population quickly become untenable. These costs are, of course, also political.
The value and values ââof the tax
As a career financial advisor, I have spent many years guiding businesses and individuals through the complexities of taxation. I am convinced that transparency and accountability are essential (and I know what I am talking about, the UK has one of the most labyrinthine codes in the world). If people know exactly what to pay, but more importantly that this money is collected fairly and then spent well, life becomes easier in every way. The best angel in us knows that we must all participate if society is to be happy and move forward. Harnessing these good instincts is the delicate task facing governments.
ASEAN countries often have a problem in this regard; sometimes we are suspicious of governments. Its populations are wary of the equitable distribution of tax revenues and feel the need to discuss sophisticated and sometimes unsophisticated methods of tax mitigation / often evasion. Corruption and lack of transparency do not build trust in any system. Until these governments change their modus operandi, including fairness, honesty, transparency, fair distribution of taxes, community orientation, business and individual incentives, this challenge will act as a continuing drag on their savings.
Taxation of the rich and big business is still one of the fulcrums on which U.S. (and other) elections will turn, and we can expect taxation to become a hot global issue as the recession continues. descends on him. Getting to the right answers will require an incredibly nuanced economic, political and humanist debate.
Any initiative by the Vietnamese government to protect trade and livelihoods should be applauded.
If money makes the world go round, then taxes make it work. However, making the tax systems themselves work is something I am happy to leave to heads wiser than mine.