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| Mr. Phan Quoc Son, Deputy Director of Hue City’s Department of Finance |
According to Mr. Phan Quoc Son, there are currently more than 6,100 enterprises operating in Hue City, an increase of 2,084 enterprises compared to the figure for 2020. Among these, 97% are small and medium-sized enterprises, contributing over VND 9,000 billion and accounting for 70% of the city’s total local budget revenue. Meanwhile, there are more than 20,300 individual and household businesses under the management of the local tax authorities, but they contribute only about VND 104 billion per year to the budget revenue.
This reality highlights that enterprises make a substantial contribution to the economy. In addition to generating GPD and increasing income for residents, enterprises also make remarkable contributions to the local budget. With the goal of achieving double-digit growth in the near future, the Department of Finance will continue to advise the City People’s Committee to build a business environment focused on four key areas: creating an innovative startup ecosystem; enhancing business management and operation capabilities and expanding market connections; supporting the mobilization of resources for investment and development, such as loans from credit institutions, production and business premises, and human resources; and strengthening investment promotion and support, as well as reforming administrative procedures.
Compared to some neighboring localities, the number of enterprises in the city remains quite modest. What are the reasons behind this situation, sir?
Analyses show that while the number of enterprises currently operating in the city remains modest, with a density of about 45 enterprises per 10,000 people, Hue still ranks in the mid-range among localities in the Central Region. Despite the city’s significant development potential, the entrepreneurial and business spirit among the people and enterprises has yet to meet expectations. Most are registering under the form of household businesses, with more than 50,000 registered household businesses, and about 20,000 of them paying taxes regularly.
There appears to be a considerable gap between the number of enterprises and household businesses. Could it be that household businesses are reluctant to “upgrade” to enterprises?
One of the reasons for the relatively modest number of enterprises, compared to the large number of household businesses, stems partly from the ease of market entry, the simplicity of management models, and the low administrative costs, as household business owners self-declare and pay a fixed tax as prescribed.
However, establishing an enterprise offers many greater advantages, especially for households with relatively large economic scales. For example, enterprises have greater ability to mobilize capital and expand business operations, better protection of legal rights, as well as easier access to preferential support policies. In the coming time, the Department will continue to propose the development of appropriate tax policies to create favorable conditions for small household businesses to start up and enter the market, while also encouraging household businesses to transition into enterprises in order to enhance production and business capacity and contribute to the local socio-economic development.
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| Supporting enterprises in promoting product trade |
Can it be understood that converting household businesses into enterprises is necessary to promote the development of the private sector?
Depending on the business model, field of operation, and scale, household business owners can choose between continuing as individual households or converting into enterprises as appropriate. However, for household businesses with relatively large production and business capacities, promoting their transition into enterprises will help strengthen their position, competitiveness, access to capital, business expansion, as well as management and operational efficiency. Simultaneously, it will create more opportunities for growth, job creation, contributions to the state budget, and drive innovation within the economy. Therefore, this transition not only benefits the enterprises themselves but also brings advantages to society and the economy as a whole.
In your opinion, what should be done to encourage household businesses to transition into enterprises?
To encourage the transition from household businesses into enterprises, it is essential to strengthen communication efforts and clearly provide information about the benefits of transition and the support policies available to enterprises, such as tax reductions, simplified administrative procedures, and tools to reduce enterprise management costs through software systems, AI virtual assistants, or support packages for training and financing. Simplifying the business establishment process as well as reducing costs and time will also help household businesses transition into enterprises more easily. In addition, preferential credit programs and capital support should be provided, especially for small- and medium-sized household businesses, when they decide to make the transition.
In particular, there must be a simplified tax management process and tax reporting requirements for micro and small enterprises. At the same time, the fixed-tax system currently applied to household businesses must be abolished.
Currently, the Department of Finance is advising the City People’s Committee on issuing the plan “Enhancing Capacity, Increasing the Number of Enterprises, and Supporting the Transition from Household Businesses to Enterprises in Hue City.” Within this plan, in addition to the policies already being implemented, the Department has proposed measures such as offering corporate income tax exemptions for the first two years to household businesses that transition into enterprises (capped at no more than 50 million VND per household per year) and providing accounting software support for these newly converted enterprises during their first two years.
How is the support for household businesses transitioning into enterprises and for newly established enterprises being implemented?
Currently, the city is implementing various support policies to help household businesses transition into enterprises and to encourage the establishment of new enterprises.
Accordingly, newly established enterprises in Hue City are eligible for support such as public digital signature usage, electronic invoice cost subsidies, and accounting service subsidies for micro-enterprises converted from household businesses. The goal of these support policies is to promote enterprise development, address tax-related challenges faced by household businesses during their transition to enterprises, encourage the use of digital signatures and electronic invoices, contribute to administrative reform, and create a transparent and efficient business environment.
In recent times, the city has provided support for digital signatures and electronic invoices to over 2,000 enterprises with a total budget of more than 2.8 billion VND, and has supported accounting service costs for enterprises converted from household businesses with a total budget of over 1 billion VND. These efforts have helped encourage the growth in the number of enterprises in the city, reduced market entry and tax compliance costs for newly established enterprises, and promoted enterprise development.
In the coming time, the Department will focus on building strong linkages among government agencies, financial institutions, and business associations to support new enterprises from establishment to effective operation. It will also organize networking events, exchanges, and experience-sharing sessions between successful entrepreneurs and household business owners or newly established enterprises, aiming to create a comprehensive enterprise support ecosystem. Additionally, it will intensify communication efforts, simplify administrative procedures, provide financial and credit support, encourage startup initiatives, assist enterprises in digital transformation, and introduce special incentive policies to help enterprises overcome challenges in their early stages.
Thank you, Sir!