Software enterprises in the country have expressed concerns over a draft value added tax (VAT) law that, if passed, would slap a 10% VAT rate on software products instead of the current 0%.

The Ministry of Finance now is sending out the draft of the VAT Law for feedbacks from local agencies. The ministry in the tentative draft plans to treat software as products subject to VAT at a tax rate of 10%, while software for export will still enjoy the 0% rate.

Entities in the local software industry said putting software into the list of items for VAT might push up prices of products as well as affect their business and production activities in the current gloomy economic conditions.

Lu Hong Chuong, deputy general director of Misa Joint-stock Co. making accounting and personnel management software, said VAT collection will make it harder to find outlets for software that is struggling with poor demand despite the present low prices. He proposed the finance ministry set a road map to collect the tax and gradually raise the tax to 10% rather than applying it all at once.

Echoing Chuong’s view, Chu Tien Dung, chairman of the HCMC Computer Association, said the tax collection will hurt software makers at home. He also called for local relevant authorities to collect the tax in an appropriate way to avoid pushing local firms into difficulties.

In fact, software enterprises last year saw business take a nosedive.

In HCMC, for example, IT revenue as a whole last year rose a staggering 63% year on year to VND86 trillion, or some US$4.2 billion, but the software revenue plunged 32% against 2011 to a mere VND8 trillion, according to the HCMC Department of Information and Communications.

Hardware revenue last year rose 90% to VND78 trillion, largely owing to Intel Vietnam whose revenue reached US$1.4 billion.

The Saigon Times Daily