Prime Minister Nguyen Xuan Phuc has approved a plan to monitor the nation’s underground economy in a bid to evaluate its overall production and thus get a clearer picture of the nation’s economy.
Thanh Nien newspaper cited a report by Fulbright University as saying that the non-observed economy in Vietnam could account for 25-30% of the nation’s gross domestic product. If the area were well documented, the size of the economy could then be fully and comprehensively reported.
|Household businesses are also on the list of the non-observed economy – PHOTO: THANH HOA
The scheme will delve into current underground economic activities, in which it has identified five groups in three sectors, including agriculture, forestry and fisheries; industry and construction; services; along with state-owned, private and FDI companies operating throughout the country.
Nguyen Bich Lam, general director of the General Statistics Office (GSO), said the non-observed economy includes five elements. The first being legal business activities whose owners have not declared their full taxes, while evading corporate income and added value taxes, avoiding social insurance contributions and not reporting business results, as required by law.
The second category is illegal activities, such as drug trafficking, prostitution and non-registered businesses.
The third is non-observed business activities, such as individual traders, and private businesses which have not signed working contracts with laborers.
The fourth is household businesses, and the fifth is the economic activity which was missed in the basic data collection program.
Bui Trinh, an economic expert, believes that the non-observed economy in Vietnam may include underground production activities. These are legal production activities, but deliberately concealed by authorities to reduce taxes or to reduce contributions to social insurance, as prescribed by law.
Trinh said, in many countries the underground production term is called “hidden activities”, “covered-up economy” or “black economy”, besides illegal economic activities, such as smuggling, bribery and prostitution.
The problem, according to Trinh, is that no businesses in Vietnam admit to having underground activities. That companies have to pay under-table fees when working with certain taxmen and customs officers, or offer bribes when violating traffic rules. Even the situation in which enterprises maintain two separate accounting books still exists.
“Nobody acknowledges the underground phenomena and admits to having prostitution, even though it obviously exists. So how can statistics be recorded? Where does the data come from? Which data will be put into GDP, because it is called the underground economy, and how do we collect taxes?” Trinh asked, and suggested not taking the non-observed economy into GDP calculations.
Meanwhile, Le Dang Doanh, an economic expert, said there must be calm to positively access the non-observed economy. He objects to taxes burdening street vendors, but it is normal to levy household businesses, which can have hundreds of employees.
Doanh said private companies contribute 12.2% to GDP; meanwhile, household businesses account for 33.1% of GDP, but contribute a mere 0.2% in budget revenue yearly.
“I fully support the scheme of taking the informal economy into calculating GDP,” Doanh said, adding that the practice will help the local private sector develop and compete with other economies among ASEAN countries.
Speaking at a recent meeting with IMF Resident Representative in Vietnam Jonathan Dunn in Hanoi, Prime Minister Nguyen Xuan Phuc asked the IMF for help to measure the non-observed economy.