The proposal by the Ministry of Finance to cut income tax payable by 30 percent for the 2026–2027 period, applicable to business households and enterprises with maximum annual revenues of VND10 billion (US$381,000), has received broad support from the business community.
For small businesses, every reduction in costs can provide additional cash flow for investment in machinery, production expansion or job retention. When hundreds of thousands of enterprises and households gain additional resources, the policy's impact could extend beyond individual businesses to stimulate consumption, investment, and economic growth.
To achieve the goal of double-digit growth, Vietnam cannot rely solely on public investment or the foreign-invested sector. Resolution No. 68-NQ/TW of the Politburo identifies the private economy as one of the most important driving forces of the national economy. For the private sector to truly become a growth engine, businesses must have the capacity to accumulate capital, reinvest and expand their operations.
Tax reductions should be viewed as an investment rather than simply a decline in State revenue. By retaining more funds, businesses can increase investment, adopt new technologies, create jobs and expand production. Although the State may see lower revenue in the short term, a stronger and larger business sector could generate a broader and more sustainable tax base over time.
However, income tax cuts are meaningful primarily for businesses that are making profits. For loss-making businesses or those with low profits, the tax savings may be limited.
Beyond tax incentives, businesses also need lower costs associated with production, operations and administrative procedures.
Businesses therefore need a favorable, stable and predictable business environment. Frequently raised recommendations include reducing administrative procedures, simplifying business conditions, shortening the time needed to process applications and improving access to credit. Costs arising from procedures, waiting times and overlapping regulations can significantly drain business resources.
Tax cuts alone cannot unlock the full potential of businesses. Their impact will be much greater when combined with institutional reforms that reduce compliance costs, streamline procedures, shorten waiting times and ensure a more stable and predictable regulatory environment.
The policy could help accelerate the transition of business households into formal enterprises. With greater access to finance, technology and markets, these businesses would be better positioned to join value chains and expand their operations. Supporting the growth of small firms into medium-sized enterprises and helping medium-sized firms scale up would improve not only the size but also the competitiveness of the private sector.
The reduction in short-term tax revenues will inevitably place some pressure on the State budget. In the long term, however, a growing business can create more jobs, expand production, increase productivity and contribute more to the budget. A stronger private sector will provide a broader and more sustainable revenue base.
Therefore, the 30 percent tax reduction should be viewed as more than a temporary measure to ease businesses’ financial pressure. More importantly, it should help turn retained resources into new investment, jobs and stronger enterprises capable of expanding.
Combined with efforts to remove institutional bottlenecks, reduce compliance costs and create a more favorable business environment, the tax cut could form part of a broader strategy to nurture businesses today, strengthen future budget revenues and create new drivers of economic growth.
