Transforming business households into firms difficult to meet target

HCMC has set a target of establishing 60,000 enterprises in 2017, of these 20,000 will be transferred from business households. However, agencies and districts said that it would be difficult to gain the target.

A large grocery in District 6, HCMC (Photo: SGGP)

A large grocery in District 6, HCMC (Photo: SGGP)

By 2020, HCMC aims at having 500,000 enterprises basing on two sources including naturally established companies and business households.
Statistics from authorized agencies show that the city now has 280,000 individual business households. Of these, 14,800 households issue invoices, over 21,200 ones with revenue topping VND100 million a month do not issue invoices. Business households are contributing about 2 percent to the city’s budget.
According to Decision 1482 of the city People’s Committee to develop 500,000 enterprises by 2020, the city has assigned norms for districts to mobilize about 10 percent of business households in their localities to transfer into enterprises.
In 2017, District 1 will have to call on 2,324 households to upgrade into companies, District 5 mobilizes 632 households, District 12 1,161, Binh Tan 1,754, District 7 1,531, Binh Thanh 1,462, Thu Duc 1,492 and Go Vap 1,333.
The city has carried out many policies to encourage and assist businesses households to transform into enterprises. City leaders have affirmed their point of view to create advantageous conditions for all types of businesses, not mobilize not force households to transform into enterprises, not follow quality but focus on quality, efficiency and sustainability.
Districts said that it would be difficult to reach the target of transferring business households into enterprises. The number of transformed households has so far reached 100 at the highest in some districts while other districts have reported tens of households.
The owner of a food shop in Xo Viet Nghe Tinh street, Binh Thanh said that the district had popularized the policy of transforming business households into enterprises. It sounds suitable with items sold at her shops because she will receive tax deduction if having input invoices. Still the transfer brings her shop some problems in tax declaration and tax levels might be different. Meanwhile, she and her daughter has run the shop for the last many years and just simply pay tax twice a year.
Groceries have been able to compete with other modern business types thanks to flexible prices and low costs. Upgrading into enterprises will cost increase making it difficult to compete, she added.
Mr. Do Ba, owner of an aluminum and glass shop which has been changed into company many years ago, said that the transfer brings a complicated human resource than a shop but he has been familiar with that. The important matter of enterprises after transforming is seeking new partners, expanding size and raising revenue unless the transfer will not be efficient.
Sharing the same view, many business households said that the problem is benefits of the transfer and the development possibility of enterprises afterwards.
Nurturing new enterprises
Transforming business households into firms difficult to meet target ảnh 1 A gold shop (Photo: SGGP) 
Mr. Phan Duc Hieu, head of the Central Institute for Economic Management, said that in nature, business households and small enterprises are one. But current policies have discriminations among them. Business households face many limitations in business rights, for instance, they are just permitted to register business at one location, operate in their districts, not open branches or offices and face difficulties in capital mobilization.
Despite these, business households still have advantages compared to enterprises. Companies take at least 24 days to start business, 60 months to close down and 540 days to pay taxes. Establishment cost of business households account for only 50 percent of enterprises.
Business households have only six types of bookkeeping while small and medium enterprises have tens. They just pay excise tax not VAT or personal or corporation income taxes. It is also easy to recruit employees for businesses households. That why they have been afraid of upgrading into enterprises.
Experts say that it is time to reform business environment and create better conditions for small and medium enterprises to encourage residents to start business under the model of an enterprises rather than business household.
Economic levers should be used instead of administrative orders to boost business households’ transfer into enterprises. The most important thing is that business households must see benefits bigger than costs while transforming. Of these, tax exemption will be the core factor to nurture newly transformed enterprises to grow up.

By THUY HAI – Translated by Hai Mien

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