The draft legislation concerning Value Added Tax is currently undergoing a phase of opinion collection and is anticipated to receive approval during the 8th session of the 15th National Assembly, scheduled for the end of November.
Notably, the drafting committee has suggested increasing the tax rate on cinema services from the existing 5 percent to 10 percent. This proposal has prompted over 30 companies within the industry, including Galaxy, BHD, CJ CGV Vietnam, Lotte Cinema Vietnam, Mega GS, HK Film, ABC Pictures, Chanh Phuong Film, CJ HK, 89SGROUP, and VCCORP, to submit a petition to both the National Assembly and the Government.
Film making companies voiced their opinions that raising the tax rate is unjustifiable. They argued that such an increase not only imposes a financial strain on businesses but also hinders their ability to navigate the existing challenges within the film industry. This situation is further exacerbated by shifting consumer habits and declining purchasing power.
The petition emphasizes that any alterations to tax rates should be approached with careful consideration and should be grounded in scientific rationale, industry growth, and the resilience of the populace, particularly under normal market and economic conditions.
Being filmmaker, director Charlie Nguyen stated that the current budget for a film is approximately VND20 billion (US$788,176), excluding promotional expenses. Following the increase in VAT, this figure rises to VND21 billion.
To achieve the break-even point, the revenue must be 2.5 times the production budget; thus, a film with a budget of VND20 billion must generate at least VND50 billion. Many films today exceed a budget of VND50 billion, indicating that to break even, they need to earn over VND100 billion.
Given such a high threshold for breaking even, investors may perceive the film industry as highly risky and may seek alternative investment opportunities, director Charlie Nguyen remarked.
Director Charlie Nguyen expressed his concern over the recent 5 percent VAT hike, suggesting that it underscores the financial challenges faced by the film industry. He further noted that filmmaking is a notoriously capital-intensive endeavor, fraught with risks that can jeopardize both financial investments and creative ambitions.
Ms. Vu Thi Bich Lien, a representative of the Mega GS cinema chain, has indicated that the increase in taxes will adversely affect the cinema industry. She noted, "In reality, many individuals have yet to develop a habit of attending cinemas. Consequently, despite the relatively low average price of movie tickets in Vietnam, we continue to bear the burden in order to cultivate this habit among audiences.
Many filmmakers assert that the repercussions extend beyond the immediate effects previously discussed. Director Charlie Nguyen noted that in order to mitigate potential losses resulting from rising tax rates, investors tend to minimize budgets. This necessitates a tightening of all phases, including the script, casting, special effects, post-production, and significantly constrains creative freedom. Young filmmakers, who are just starting their careers, are likely to bear the brunt of these limitations.
Vietnamese film businesses are urging authorities to consider their petition to either maintain the 5 percent tax rate or lower it to 3 percent. Ideally, they seek a reduction to 3 percent, which would represent a 2 percent decrease from the current rate.
Furthermore, filmmakers aspire for a more thorough, comprehensive, and objective assessment from management regarding the present condition of the Vietnamese film market. In reality, Vietnamese cinema is often perceived as merely the tip of the iceberg.
During the National Assembly session at the end of October, Standing Member of the National Assembly's Culture and Education Committee Bui Hoai Son said that the government should not observe one or two films generating several hundred billion Vietnamese dong to conclude that the national film industry is thriving. In truth, the majority of films are operating at a loss.
