There are many reasons why business households are reluctant to convert to businesses. There is a very specific reason: The high tax rate gap between business households and enterprises.
Lao Dong Newspaper once cited a story about a pho shop owner with less than 10 service staff, this person said: "When I was a business household, I was subject to contract tax, card tax and some other taxes and fees... a total of less than 10%. However, if you register to become a "porridge selling enterprise" and expand your store chain, corporate income tax alone is 20%. So what is the big deal?
In fact, the application of contract tax has long been considered convenient but creates a huge loophole, when business households only declare low revenue (due to no documents or books), not to mention that they can "go overnight" with tax officials to reduce the tax payable. This not only causes loss of revenue, creating an imprecise and unfair environment in the tax sector.
Tax also creates a mentality of not wanting to change, not wanting to "upgrade" into a business in a business household, leading to difficulties in expanding business, accessing capital and technology.
The consequences of this vicious cycle limit the capacity of the private economic sector. According to calculations, Vietnam currently has over 5.2 million business households, creating 8-9 million jobs. If only a part of these five households are converted into enterprises, Vietnam will achieve the target of having 2 million enterprises set for 2030, enhancing the competitiveness of the economy.
Resolution 68 of the Politburo and Resolution 198 of the National Assembly have opened up very clear opportunities for the private sector along with institutionalized active support mechanisms and policies, including support on taxes and fees. From the opposite perspective, strictly implementing tax regulations, applying technology to declare and pay taxes based on actual revenue is also the responsibility of business households and small enterprises.
Abolishing contract tax is a breakthrough policy, using legal tools that require businesses to convert to fulfill tax obligations.
In addition, it is necessary to continue to have support policies, create conditions for procedures and documents for the business community to simultaneously transform, rise to become enterprises, contribute to the strength of the private economy, affirm its role as a "most important driving force" and "pioneering force" of the economy.
