For decades, most small businesses in Vietnam’s one-sided communist state have used a well-bound lump sum system, where taxes are calculated based on an estimated basis rather than formal accounting.
In many cases, the revenue assessment rely on informal consultations with local tax authorities, as many businesses often do not maintain detailed sales records.
For the Finance Ministry of Vietnam, about 2 million domestic business and entrepreneurs were using a lump sum method in early 2025, while only 6,000 adopted more complex declaration systems by only 6,000.
The lump sum system wants to be completely abolished from 2026, which means that all registered businesses will be requested to use the declaration system.
The change is part of the 68-A Grand Scheme declared by Vietnam in May this year, to make the country’s homegron private companies to make the “most important driving force” of the economy by 2035. It was traditionally gained privilege by Hanoi.
Why is Vietnam overhale his tax system?
The purpose of the resolution is to eliminate markets for local firms, increase their safety and improve access to capital. This is legally the first to explain the rights of property, fair competition and contract enforcement as principles.
While the resolution offers tax exemption for 68 businesses and workers and years of low administrative cost, its purpose is for enough increasing tax revenue in the coming decades.
Economic incentives are determined to increase public spending due to efforts and combination of infrastructure development goals. But the government will have to find new sources of revenue, capping the public debent with the Communist Party of Vietnam.
Data (OECD) of the Economic Cooperation and Development Organization suggests that Vietnam’s tax-to-GDP ratio has declined in recent years, standing at 16.8% in 2023, which is below 33% of the Asia-Pacific average of 19.5% and the OECD average of 19.5%.
Vietnam collected a record 1.6 Quadrilian Dong (about 66.7 billion, € 57.10 billion) in taxes in 2024, mostly from domestic sources, according to the taxation department.
In the first five months of 2025, the Vietnamese authorities collected about 560 million dollars from small businesses, a 26% year-on-year.
Vietnam wants to become Asia’s next ‘Tiger Economy’
Hanoi is expected to collect capital for mega-infrastructure projects, search as high-speed rail and expressway, which is important for future development. Alone this year, it plans to increase the infrastructure expenses from about 40% to $ 36 trillion.
Therefore it should be rapidly ready to increase social security costs as Vietnam’s age. The share of more than 65 wants to jump up to 20% by 20% from 8.4% to 2050 in 2020 United Nations Forecasting Still very few retired people currently receive a lustable pension.
Cracking corruption
The Communist Party wants to modernize the tax collection to curb corruption, uniquely in notorious corrupt revenue offices.
Since 2016, its anti-grand campaign has topped two presidents, several cabinet ministers and thousands of lower ranked officers.
According to Vietnamese officials and business analysts, many high-revenue companies continue to use the method by lump sum, which is the result of a generally low monthly contribution compared to the declaration system.
They believe that Vietnam’s homegron private sector requires “fair competition” and similar treatment, and means that everyone is paying their share.
A visiting Fellow Khak Giang Guayen at the ISEAS -Yuq Institute in Singapore said, “Both objectives are admirable, but it is difficult to increase more revenue, which is difficult to tighten the complexion rash polication. ,
But success “will depend less on writing new rules, they have been impartially, transparently and without rented habits, which wiped out the public trust,” Hey said.
Small business brunt reforms
The decent in Vietnam is rare, where the Communist Party has tightened its grip in the last decade. But videos of distressed store owners who complained about new tax demands have gone viral in recent weeks.
Since every business has to switch to the announcement system by January 2026, many people will have to face growth, pay for expensive cash register, learn bookkeeping method and accountancy, and train employees to navigate new rules.
This comes because many areas are still recovering from the Kovid -19 epidemic. He tolerated the months of uncertainty on whether the United States would impose 46% tariffs on Vietnamese goods. Last month, Hanoi interacted up to 20%of the rate.
Apart from all this, “People in the markets are still shaking by corrupt police,” told DW, Professor of National War College in Washington.
While the government wants an increase in the private sector, the demand for a new tax is “the unexpected result of excluding many people from the business,” Hey said.
In July, VAT, corporate taxes and updated laws on individual income tax cam request business to engage in more accounting and record-keeping.
Additionally, last month, new and often complex procedures were introduced to release challans, pay VAT and share information with the authorities. The government has doubled the threshold when people start paying income tax.
Radio Free Asia reported in June that 80% of shops in Vietnam’s largest NGHE’s largest market have been closed in recent months.
Officials have denied claims that tax changes are behind the shutdown. Hanoi officials shut down around 3,000 domestic businesses in May and June, but said that only 263 had only revenue high to adopt the new system from June.
Edited by: Keith Walker
