Small business households and the profit problem
The roadmap for converting the entire business household from the contract method to the self-declaration model is being accelerated, causing many concerns about the level of taxable revenue. The current tax exemption of 200 million VND/year has become a hot spot of debate, as many opinions say that this figure is "no longer meaningful" in the context of input costs, land rent and electricity and water both increasing sharply.
Ms. Nguyen Thi Lien, owner of a small pho restaurant in Cau Giay (Hanoi) said that the revenue is not small, but when deducting a series of expenses, the actual profit is only very thin.
She shared: "A bowl of pho sells for 40,000 - 45,000 VND, but the cost of ingredients is constantly increasing: Beef, pho noodles, spices... then gas, electricity, water. The monthly rental fee is more than 15 million VND. Every day, a small restaurant like mine sells about 60 - 70 bowls normally, calculating the revenue can exceed 200 million VND very quickly, but the profit is very thin".
According to Ms. Lien, many households used to have the habit of reporting low revenue because of constantly fluctuating costs, so the 200 million VND/year mark became too low if calculated according to actual profits. She hopes the tax exemption threshold can be raised to about 500 million VND/year. "If we only have enough money, 200 million VND a year is no longer meaningful. The rent for the premises and electricity and water alone has taken up the majority. We hope for a higher threshold to reduce pressure, because small businesses are now struggling, how to cover enough monthly expenses is already a difficult problem".
Similarly, Mr. Le Minh Hung, owner of a grocery store in an alley on Lac Long Quan Street (Hanoi) said that the 200 million VND/year "does not accurately reflect the current cost level", because the fixed fees have increased sharply.
He said: A small grocery store like me, earns about 2 - 3 million VND per day. Peak days may be better. However, the import and export expenses account for the majority, then transportation fees, loss of goods, and electricity for freezers - refrigerators every month, which is several million. I am lucky not to have to rent a premises, but the monthly interest is not much, if I rent tens of millions/month like others, I will probably not have interest".
The tax rate of VND 200 million/year is too low, should be increased to VND 500 million - VND 1 billion/year
Regarding the tax revenue threshold of business households, Ms. Nguyen Thi Cuc - Chairman of the Vietnam Tax Consulting Association - said that the level of 200 million VND/year is "no longer suitable" because statistics rely heavily on contract revenue, not accurately reflecting the actual scale of business households today.
Ms. Cuc analyzed that if 200 million VND was divided for 360 days, the average revenue would be less than 600,000 VND per day. With a bowl of pho costing 40,000 - 50,000 VND, just selling about 15 bowls a day will surpass this mark.
Ms. Cuc further explained: With a revenue of 1 billion VND per year, the average profit is about 16%, equivalent to 160 million VND, or about 13.3 million VND per month. This level is equivalent to the income of a public employee who is currently applying a family deduction of VND 15.5 million".
According to Ms. Cuc, the transparency of new revenue is the decisive factor in designing a reasonable tax exemption level. She cited some cases in Hanoi and Vung Tau that declared very low or undeclared revenue even though the actual revenue was up to hundreds of billions of VND, showing a large gap between real revenue and declared revenue.
Continue to monitor and may adjust if necessary
Deputy Director of the Tax Department Mai Son said that current statistics show that if the revenue threshold of 200 million VND/year is applied, about 44.4% of business households will be exempt from personal income tax. According to him, the design of this threshold has taken into account the ability to support small business groups.
Mr. Son said that the tax sector is in the process of transitioning from contracting to self-declaration, so the tax authority will continue to monitor, assess the actual impact and listen to people's feedback. If necessary, the tax authority will propose to adjust the revenue level more appropriately to ensure a policy that is close to reality, said Mr. Son.
