CaliToday (16/9/2025): A new government proposal to increase taxes on "business households" (hộ kinh doanh) has ignited a heated economic and political debate across Vietnam. While officials may be seeking to bolster state revenue and formalize the economy, the proposal has been met with significant apprehension, particularly regarding its potential adverse effects on the nation's millions of small, family-run enterprises.
The Heart of the Controversy: Vietnam's Business Households
For an outside observer, the term "business household" is a unique feature of Vietnam's economy. These are not formally registered companies but are legally recognized, micro- and small-sized businesses, often operated by individuals or families. They form the backbone of the local economy, encompassing everything from neighborhood noodle stalls and local coffee shops to small retail stores and independent service providers. Because of their sheer number and role in employing millions of people, any policy affecting them has widespread socio-economic ramifications.
Widespread Concerns Over the Impact on Small Businesses
The central argument against the proposed tax hike is the fragility of these small enterprises. Critics, including economists and the business owners themselves, raise several key points of concern:
Threat to Livelihoods: Most business households operate on razor-thin profit margins. A sudden increase in tax obligations could directly reduce a family's primary income, pushing many towards financial hardship. For them, a tax increase isn't just a business expense—it's a direct cut to their household budget.
Reduced Competitiveness: Faced with higher costs, these businesses would have two choices: absorb the cost and earn less, or raise prices for their customers. The latter could make them less competitive compared to larger corporations or chain stores that can benefit from economies of scale.
Risk of Discouraging Entrepreneurship: The relative ease of starting a business household has long been a driver of grassroots entrepreneurship in Vietnam. Critics fear that a heavier tax burden could deter people from starting new businesses, potentially stifling economic dynamism and job creation at the local level.
Potential for Informalization: Rather than paying a higher tax, some businesses may choose to operate "under the table" in the informal economy. This would be counterproductive to the government's goal of economic formalization and could lead to a net loss in tax revenue.
Broader Economic and Political Dimensions
This debate extends beyond individual balance sheets and touches on core national economic strategy and political stability. From a political standpoint, the government faces a delicate balancing act. On one hand, there is a clear need to ensure sufficient state budget revenue to fund public services and infrastructure. On the other hand, alienating a massive segment of the voting and working population carries political risks.
Furthermore, the new content you provided has been integrated here: The discussion has also intensified to include the critical issue of fiscal responsibility and public trust. Critics argue that the legitimacy of a tax increase is directly tied to how the state manages its expenditures. There is a deep-seated concern that if higher tax revenues are channeled into wasteful public spending or projects with artificially inflated costs, it would represent a double loss for businesses and the economy. Not only would enterprises be burdened by higher taxes, but they would also suffer from the inflationary pressures that such inefficient spending can create. This scenario, they contend, undermines the very purpose of taxation and erodes public confidence in the government's ability to act as a responsible steward of taxpayer money.
Economically, stifling the sector that provides the most jobs could have a domino effect, potentially leading to higher unemployment and reduced consumer spending. Therefore, the discussion is not merely about whether to raise taxes, but about the fundamental role the government envisions for its small business sector in the country's future development.
