The picture is blatantly clear when we see near empty airplanes, empty hotel rooms and tourist resorts, scant occupancy in restaurants and service facilities lying redundant.
However, even as goods are not being sold or services not running to capacity, businesses are still having to pay off loan interests, worker wages, ground rental, social insurance, along with so many other taxes and petty fees. It is now becoming increasingly more and more difficult for all businesses to maintain a cash flow when turnover is not adequate enough and reserves are limited.
Many immediate solutions are required to be implemented and show more positive results within March such as the Ministry of Finance and the State Bank of Vietnam directing appropriate solutions towards removing difficulties in capital, tax reduction and cost reduction. There can also be very specific solutions such as doing away with periodic inspections in 2020 for enterprises with no legal violations, create maximum conditions for enterprises to solve difficulties, and help continue in maintaining production and business activities.
However, there are also many long-term solutions such as promoting e-payments, reducing long drawn processes in administrative procedures and quickly wind up a back log of good Government policies that are waiting to be implemented. These issues were previously being hesitatingly followed through but now is time to speed up their implementation to support businesses.
For the most part, all businesses would welcome expansion and reduction of taxes, lower social insurance premiums, trade union fees and other fees. These would greatly ease the burden on production and business. The Ministry of Finance has now completed and published a draft decree related to many tax issues. Although businesses have to reduce prices to stimulate demand, the tax burden is still too much for all businesses, especially in the present unpredictable scenario. For example, air freight and airline freight rates have dropped sharply, but many airport fees are still very high, adding to a large portion on the ticket price, so only the efforts of businesses is not enough.
Some businesses are concerned with the delay or deferment of VAT and corporate income tax for the 2019 period that most businesses have already paid. If this is not handled well then the 2019 tax relaxation may only benefit businesses with low compliance and those deliberately holding tax arrears, and thus encourage tax debt. While many serious businesses are paying tax, in the present scenario there is no profit, hence the extension of VAT and corporate income tax will not make much sense.
Vietnamese enterprises are fundamentally quite different from enterprises in other countries in their ability to raise capital from a limited capital market, and therefore depend heavily on bank loans. Although interest rates on bank loans in Vietnam are quite low, they are still higher than in some other countries, as the cost of capital for businesses is very high. Therefore, the credit support program of banks under Directive 11, which affords a credit support package with interest rate of VND 250,000 bn for enterprises, is very important. There are many banks now actively involved in helping businesses.
However, the bank too is an enterprise, and in addition to complying with credit safety regulations, it must also take into account the factors of cost and profit, so interest rates cannot be reduced immediately. The role of the State Bank is wider and it is necessary to amend the regulations so that the bank can extend loans without having to handle bad debts. Enterprise loans are severely affected by the Covid-19 pandemic that can stretch for many months still and enterprises will not be able to utilize the credit, which will affect loan interest and borrowing cost for enterprises in the future.
The issuing of Directive11 is a very positive sign for businesses. However, many businesses are still prejudiced against any support programs because of poor implementation process and so only some large enterprises are benefiting, with many other enterprises not actually having any access to such support. Hopefully the implementation of Directive 11 will erase some of these prejudices among the business community, especially in these present unprecedented and drastic times.
