Legislators cut enterprise income tax Workers at the Thuong Dinh Footwear Co Ltd in Ha Noi. - VNA/VNS Photo Ngoc Ha HA NOI (VNS)- Law makers yesterday backed the Government's proposal to reduce the current general level of enterprise income tax to 22 per cent in an effort to boost investment in Vietnamese businesses. The issue was discussed at a session of the National Assembly Standing Committee, and it was agreed that the 3 per cent drop in tax would be an effective measure to support struggling enterprises. The deputies also agreed to set an enterprise income tax rate of 20 per cent for small and medium enterprises, while businesses working in the social housing field will be taxed 10 per cent. Expanding investment projects will also qualify for preferential tax rates based on the scale of cash injections and the project regulations in each region. Some participants in the discussions called for the tax reductions to come into force from the beginning of July this year rather than January 2014, as proposed by the Government, in a bid to solve difficulties facing the business community as soon as possible. However a full resolution has yet to be agreed and so the date of implementation will be set in the near future. NA Chairman Nguyen Sinh Hung and Law Committee Chairman Phan Trung Ly said that implementing preferential tax rates for enterprises was a positive measure, but warned that tax reductions should only be made in combination with adjustments to income tax and value added tax (VAT) laws that will be submitted to the NA for approval next May. Other fields facing economic struggles, including agriculture, aquaculture and forestry in mountainous and island areas could also receive preferential tax rates in the near future, Hung added. Hole in the budget? The Government has estimated that the State Budget will lose nearly VND2.65 trillion (around US$126 million) due to the approved tax reductions. Some deputies remain concerned that the VND2.65 trillion support package will not be effective, with Deputy Minister of Finance Vu Thi Mai arguing that the measure will add unnecessary extra pressure to the State Budget. "The budget collection in the first quarter of 2013 was equal to 20.6 per cent of this year's target, which is between 3-5 per cent less than the rate received in previous years," said Mai. Other deputies called for a range of short term and small scale support packages to be implemented alongside other policies in order to further help enterprises overcome difficulties. - VNS