Vietnam will cut income tax, defer sales tax payments and cap lending rates for some companies, stepping up efforts to bolster a slowing economy.
Corporate income tax for small- and medium-sized companies and labor-intensive enterprises will be cut by 30 percent, Vu Duc Dam, chairman of the government office, told a briefing in Hanoi today. Short-term commercial lending rates will be capped at 3 percentage points above the deposit rate limit for some sectors, according to a statement on the central bank website.
The new lending regulation will “help companies and citizens reduce borrowing costs, recover and maintain production and business operations, and support reasonable economic growth,” the central bank said.
Vietnam’s economy expanded at the slowest pace since 2009 in the first quarter as bank lending declined and domestic demand weakened, adding pressure for steps to boost growth. Businesses will be allowed to delay value-added tax payments on sales in April, May and June by six months, according to officials at the briefing. The cost of land leases for some businesses, including those in tourism, textiles and services, will be reduced by 50 percent.
“This shows a consensus in the government on the need to give immediate help to save businesses,” Vu Thanh Tu Anh, director of research at the Fulbright Economics Teaching Program in Ho Chi Minh City, said before the announcement. More “fundamental” policy changes are also required to reduce uncertainty about the economy, Anh said.
Short-term commercial lending rates will be capped at 15 percent, or 3 percentage points above the current deposit rate, for businesses in industries including exports, agriculture, and small and medium-sized enterprises. The new lending rate regulation takes effect May 8, according to the central bank statement.
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