Vietnam has been levying unnecessarily high duties and fees on economic sectors, reducing businesses’ capital accumulation ability and greatly contributing to the country’s macro-economic instability, the National Assembly’s Economic Committee said in its latest report. The report, titled “From Macro-Economic Instability to Restructuring,” concludes that many policies in Vietnam have been developed differently compared with other countries, and even “fail to be in accordance with the world trends.” “Vietnam taxpayers have to pay higher personal income taxes than their counterparts in China and Thailand, although their incomes are much lower,” the report, sponsored by the United Nations Development Program (UNDP) in Vietnam, comments. Vietnamese taxpayers, whose annual earnings range between US$3,451 and $5,175, are subject to a 10 percent personal income tax, while the respective pairs of figures in Thailand and China are $4,931-$16,434 and $3,801-$9,500. “The state budget collection from taxes and fees in the 2007 – 2011 period was around 26.3 percent of gross domestic product (GDP),” the report says, citing figures from the Ministry of Finance. “It was far higher than those recorded in other countries, as the figure in China was only 17.3 percent, Thailand and Malaysia, around 15.5 percent, and India, 7.8 percent.” Similarly, most local businesses have to pay a fixed 25 percent corporate income tax, while the duties are imposed in a wide band between 2 and 30 percent in other nations. The report also points out other high duties in Vietnam, such as the excise and import taxes, and the “unofficial” fees. “More than 55 percent of businesses said granting commission to win advantages in the tender bidding process for state projects is common,” the report says, citing a recent survey. High duties also encourage businesses to engage in tax evasion, such as the price transferring phenomena in the foreign-invested (FDI) sector, the report adds. “The FDI sector accounts for 20 percent of GDP, but they only attribute some 10 percent of the total state budget collection,” it says. “The high duties in Vietnam have forced FDI businesses to transfer their profits to other countries to enjoy lower rates.”High public spending The report also analyzed state budget spending, and determined that the government’s public spending is too high, haphazard, and ineffective. “Investments from the state sector have been earmarked in almost every sector, from education and public health care to manufacturing and processing industries and entertainment,” said Pham The Anh, one of the report’s authors. “Specifically, public spending on the realty, finance, banking, and construction sector has soared drastically from 1.9 percent in 2009 to 4.8 percent of the total spending in 2010.” Moreover, regular spending, which is earmarked for wage payment, administrative costs, and power and water expenses, account for a large proportion of the total figure, while spending for development is on a downward trend, the report notes. “Regular spending rose from 63.2 percent of the total spending in 2003 to 75.4 percent in 2011,” it says. Consequently, the government had to borrow an annual loan of VND110 trillion over the last two years, nearly double the from 2007 – 2009, through the issuance of issuing domestic bonds. “If public spending exceeds the safe rate, it will hinder economic growth, and causes disadvantages over the private economic sector,” the report warns.