VietNamNet Bridge – The Ministry of Finance (MOF), after many years of turning a deaf ear to business complaints, has agreed to lift the spending on ceiling on ads in an effort to help businesses improve their competitiveness.
“Lifting the ceiling spending on ads is a correct decision of the state management agencies,” said Dinh Thi My Loan, chair of the Vietnam Retailers’ Association.
In fact, the ministry has been gradually offering a compromise to businesses over the many years, when it agreed to raise the ceiling step by step, from 7 percent of the total expenditure to 10 percent and then to 15 percent in 2013, when the amended corporate income tax law took effect.
However, business repeatedly said they had the right to determine how much to spend on ads and marketing.
The biggest concern of MOF, the ministry in charge of collecting tax from businesses to the state’s coffer, is that businesses may evade tax if they do not bear any restrictions.
However, Dr. Nguyen Huu Dung, deputy chair of the Vietnam Association of Seafood Exporters and Producers (VASEP), said the decision would not lead to the loss of revenue of the state’s coffer, but would help increase the revenue.
“The spending items of these enterprises would be revenue from other enterprises on which the State will impose tax. Therefore, there is no need to fear the loss of revenue,” Dung said.
Nguyen Thanh Ha, deputy secretary general of the Vietnam Advertisement Association, also noted that it was the old regulation on restricting expenditures on ads and marketing which led to a loss of state budget revenue.
According to Ha, 80-90 percent of ad costs are spent on the production. An ad product may be cost $1 million, but the $1 million is not taxable income, because the product is made overseas and it only appears in local mass media. Media agencies can only undertake a small job in the production chain.
The Vietnam Retailers Association has refuted the claim that manufacturers would raise selling prices of their products, now that they can spend more money on ads and marketing.
Loan noted that if manufacturers spent too much on ads, which pushes production costs up, their products would not sell.
A survey conducted by Ernst Young, an auditing firm, also pointed out that the lifting of the cap on marketing expenses would not only help foster economic growth and help businesses improve their competitiveness, but will also allow consumers to receive competitive products at low prices.
The Deputy Chair of the Vietnam Beer, Alcohol and Beverage Association noted that the higher spending on ads does not mean higher selling prices. If businesses’ sales can go well, they will adjust the selling price to make it more reasonable.
Pham Thanh Minh, Secretary General of the Hanoi Ad Association, said that businesses were relieved that they could now spend as much money as they want on ads and marketing in order to optimize profits and build up their brands.
Duy Anh