At present, a number of members from the NA Committee for Finance and Budget disagree with the continued reduction of the personal income tax for other tax payers in the second half of this year.

The fact is that developed countries like the US and Germany apply tax exemptions to stimulate domestic consumption needs while the corporate income tax can be reduced and the personal income tax for business households can be exempted.

For the time being, the law on personnel income tax in Vietnam has something different from 2007 when it was first drawn up.

According to the Government’s report, the current level of tax reduction is affordable, and at this rate the State budget’s overspending has reached nearly 8 percent of GDP.

Reporter: Do you think the overspending level of 8 percent will greatly affect the national economy?

Mr Kien: In the current situation, the level of budget overspending can be increased from 5-8 percent. After that, the level can be reduced by collecting taxes or readjusting export-import tax rates.

When looking at the 2007 State budget’s balance sheet announced by the Ministry of Finance, we find accounts need to be controlled. However, the adjustment can hardly kick start the economy due to existing shortcomings like wrong accounting of export-import taxes which only leads to overdue debts and huge amounts of money channeled into banks for lending without any refunds soon. The estimated figures total as much as hundreds of billions of VND, but are far from enough to keep the economy purring along.

Reporter: In fact, many people are still worried about the large level of overspending at present.   

Mr Kien: We must define the objective of overspending. Only by controlling the level of overspending, can we solve the issue.

In addition, any moves must be based on the economic situation. If foreign partners stop buying our goods, even reduced taxes will not do.

On stimulating demand, theoretically speaking, if we effectively put VND17,000 billion to use, then we can mobilise VND400,000-420,000 billion into the system. Nevertheless, results will depend on how other components of the economy are put in place. It’s not because of any r isks that we have to raise the level of overspending to 8 percent. The question is how much and how long we need overspending. Some National Assembly Committees propose the Government come up with specific plans to solve medium and long-term debts, rather than push up overspending first and collect taxes later.